Purchasing real estate for coworking space

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Sounds like a great idea! I don’t have a lot to add as I’ve never purchased a commercial building. We lease the building that Office Nomads is in although we would love to buy it.

Jacob

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On Sat, May 16, 2015 at 7:05 AM, Stephanie Miles [email protected] wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


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I dug up one previous conversation on purchasing vs renting:

https://groups.google.com/d/msg/coworking/Kxg1RQrqcX8/xefES2991W0J

I’ll pop back here later with some longer-form thoughts!

-Alex

···

On Mon, May 18, 2015 at 11:59 AM, Jacob Sayles [email protected] wrote:

Sounds like a great idea! I don’t have a lot to add as I’ve never purchased a commercial building. We lease the building that Office Nomads is in although we would love to buy it.
Jacob

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The #1 mistake in community building is doing it by yourself.

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On Sat, May 16, 2015 at 7:05 AM, Stephanie Miles [email protected] wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


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We bought and renovated our building. I cc’d my wife who can give you more details as that’s her area of experience (I’m the IT guy).

Keep in mind that while the loan payments may be less, you’ll also have to figure in property taxes, repairs/improvements and other items that wouldn’t be a part of a commercial lease (depending on the lease type, of course). Just make sure you do an apples to apples comparison when you’re calculating the costs involved.

That being said, it does have the upside of not having to worry about things like a landlord tripling your lease because WeWork artificially inflated commercial property values in your area.

Glen Ferguson

Phone: 301-732-5165

Email: [email protected]

Website: http://coworkfrederick.com

Address: 122 E Patrick St, Frederick, MD 21701

···

On Mon, May 18, 2015 at 11:59 AM, Jacob Sayles [email protected] wrote:

Sounds like a great idea! I don’t have a lot to add as I’ve never purchased a commercial building. We lease the building that Office Nomads is in although we would love to buy it.
Jacob

Visit this forum on the web at http://discuss.coworking.com


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On Sat, May 16, 2015 at 7:05 AM, Stephanie Miles [email protected] wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


You received this message because you are subscribed to the Google Groups “Coworking” group.

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Thank you for the insights! Glen, I hope your wife pops in with her thoughts, as well. We’re still in the earliest stages, and I still need to run all the numbers (taxes, etc.), but the building we’re looking at seems like such a great opportunity. I just wanted to make sure I wasn’t missing a big piece of the puzzle here.

···

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Run the numbers, but sounds like a great idea if the numbers work. Another thought I’ve had is to switch to non-profit, as we currently pay more in property taxes than in staffing!

···

On Tuesday, May 19, 2015 at 8:57:16 AM UTC-4, Stephanie Miles wrote:

Thank you for the insights! Glen, I hope your wife pops in with her thoughts, as well. We’re still in the earliest stages, and I still need to run all the numbers (taxes, etc.), but the building we’re looking at seems like such a great opportunity. I just wanted to make sure I wasn’t missing a big piece of the puzzle here.

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

I am thinking of buying the property that Creative Density in Denver is in after four years. It’s still not a straightforward question verse leasing because it would actually increase our expenses by about $1200 a month with taxes, etc. but it would lock in a steady set of expenses in our growing city. In two years when my lease is up I could see it increasing by $1200 anyways in rent if I didn’t buy it.

I could also say that I wish I bought it four years ago in hindsight but back then I didn’t know if the space would be right for the community, but now I know people like it and our community continues to steadily grow. Creative Density starting out as a lease echos the mantra here of don’t do a ‘build it and they will come.’ I’ve tested out the space, I know it well, and I know it is in a good location for my community.

So I would take a step back and ask ‘What does your community think of the space?’ If you have their buy-in then it might make a great financial decision. If you find out that your space is not a good fit then you’ll find yourself on an expensive endeavour as a commercial real estate owner without much experience.

So I would take a step back and ask ‘What does your community think
of the space?’ If you have their buy-in then it might make a great financial decision. If you find out that your space is not a good fit then you’ll find yourself on an expensive endeavour as a commercial real
estate owner without much experience.

That’s exactly my fear. However, the other side of the coin is that we lease a space with no option to buy, and end up having to move locations a few years down the line when it’s clear we have the buy-in. That would be a major expense, too, so it seems like there are upsides/downsides either way.

···

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Have you enlisted a broker?
I typically sign leases 5-10 years, plus 1-2 options of 5-years/option. That totals some 10-15 years at one location.

Restaurants might sign 25-year leases.

To me, that sounds like plenty of time to be at a single location.
JEROME CHANG

WEST: Santa Monica
1450 2nd Street (@Broadway) | ph: (310) 526-2255

CENTRAL: Mid-Wilshire
5405 Wilshire Blvd (2 blocks west of La Brea) | ph: (323) 330-9505

EAST: Downtown
529 S. Broadway, Suite 4000 (@Pershing Square) | ph: (213) 550-2235

NORTH: Pasadena (Opening 2015 Q4!)
600 E. Colorado Blvd. (@Los Robles)




···

On May 19, 2015, at 9:19 AM, Stephanie Miles [email protected] wrote:

So I would take a step back and ask ‘What does your community think
of the space?’ If you have their buy-in then it might make a great financial decision. If you find out that your space is not a good fit then you’ll find yourself on an expensive endeavour as a commercial real
estate owner without much experience.

That’s exactly my fear. However, the other side of the coin is that we lease a space with no option to buy, and end up having to move locations a few years down the line when it’s clear we have the buy-in. That would be a major expense, too, so it seems like there are upsides/downsides either way.

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


You received this message because you are subscribed to the Google Groups “Coworking” group.

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I guess my concern is that I’d hate to look back 5 or 10 years down the line and think “Geez, I should have just bought a space.” A lot of it will come down to the cost of what’s available (both to buy and lease) when we’re at that stage. In the small community we’re in, there aren’t tons of spaces that would even be suitable. Still in the earliest stages of planning right now…

···

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

“I guess my concern is that I’d hate to look back 5 or 10 years down the line and think ‘Geez, I should have just bought a space.’”

I think of this kind of decision as “future-defensive”. It’s common - to do something now to prevent something later. Except…5-10 years down the road, are you REALLY going to be in a worse position to buy, vs better?

There’s no such thing as a perfect space - now or later - so I would make sure that a purchase is a strategic choice vs a future-defensive one.

Separately from the coworking space itself - ask yourself some questions. Do you want be a building owner? Why? What happens if the coworking space fails - do you still want to own that building? What else would you want to do with it?

It’s definitely smart to be thinking about this, and it’s something that’s personally a close-to-home issue for me, but it sounds like you’re putting the cart before the horse.

I’ve learned a LOT about commercial real estate along the way…but I don’t regret renting for the last 8 years. It’s really helped us stay focused and learn what we’re best at. A fully loaded mortgage, insurance, etc would’ve been a bit more expensive financially, but renting gave us a LOT of flexibility and peace of mind that owning wouldn’t have.

I’d put your energy into in two places:

1 - work on building your community before you even start thinking about specific locations. Until you have a community who wants to make this happen with you, the rent v purchase conversation is premature.

2 - start talking to a lot of business owners, regardless of your goals of buying or renting. Find someone who you really like and trust, and understands what you’re thing to do. Whether you rent from them or have their assistance when you begin to execute a purchase, it’ll be VERY valuable to have them on your side long before you NEED anything from them.

-Alex

···

The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://dangerouslyawesome.com/podcast

On Tuesday, May 19, 2015, Stephanie Miles [email protected] wrote:

I guess my concern is that I’d hate to look back 5 or 10 years down the line and think “Geez, I should have just bought a space.” A lot of it will come down to the cost of what’s available (both to buy and lease) when we’re at that stage. In the small community we’re in, there aren’t tons of spaces that would even be suitable. Still in the earliest stages of planning right now…

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


You received this message because you are subscribed to the Google Groups “Coworking” group.

To unsubscribe from this group and stop receiving emails from it, send an email to [email protected].

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The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://dangerouslyawesome.com/podcast

+1 for Alex’s two main tips there. First thing’s first. And a big +1 for Jerome’s lease tips as well.

I’ll add something from my experience, because I’m dealing with it now and it’s SO important to so many of us out there.

**Plan for how this is all going to play out. **

It’s easy in the beginning to shirk advice of developing an exit strategy, because it can feel at the time like an insult to the passion you feel for your new project.

“But we’re in love! We’ll be together forever!”

No, you won’t. Your business will outlive you, or you will outlive your business. In either of those cases, you both will benefit tremendously from preparing for a world in which you and your business are two different things with two different lifetimes.

It doesn’t mean you need to have exact answers ready before you even begin, but if you have the possible exits in mind early and revisit them at least annually or so, you’ll be insuring yourself against future crises.

···

On Fri, May 22, 2015 at 3:15 PM, Alex Hillman [email protected] wrote:

“I guess my concern is that I’d hate to look back 5 or 10 years down the line and think ‘Geez, I should have just bought a space.’”

I think of this kind of decision as “future-defensive”. It’s common - to do something now to prevent something later. Except…5-10 years down the road, are you REALLY going to be in a worse position to buy, vs better?

There’s no such thing as a perfect space - now or later - so I would make sure that a purchase is a strategic choice vs a future-defensive one.

Separately from the coworking space itself - ask yourself some questions. Do you want be a building owner? Why? What happens if the coworking space fails - do you still want to own that building? What else would you want to do with it?

It’s definitely smart to be thinking about this, and it’s something that’s personally a close-to-home issue for me, but it sounds like you’re putting the cart before the horse.

I’ve learned a LOT about commercial real estate along the way…but I don’t regret renting for the last 8 years. It’s really helped us stay focused and learn what we’re best at. A fully loaded mortgage, insurance, etc would’ve been a bit more expensive financially, but renting gave us a LOT of flexibility and peace of mind that owning wouldn’t have.

I’d put your energy into in two places:

1 - work on building your community before you even start thinking about specific locations. Until you have a community who wants to make this happen with you, the rent v purchase conversation is premature.

2 - start talking to a lot of business owners, regardless of your goals of buying or renting. Find someone who you really like and trust, and understands what you’re thing to do. Whether you rent from them or have their assistance when you begin to execute a purchase, it’ll be VERY valuable to have them on your side long before you NEED anything from them.

-Alex


The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://dangerouslyawesome.com/podcast

On Tuesday, May 19, 2015, Stephanie Miles [email protected] wrote:

I guess my concern is that I’d hate to look back 5 or 10 years down the line and think “Geez, I should have just bought a space.” A lot of it will come down to the cost of what’s available (both to buy and lease) when we’re at that stage. In the small community we’re in, there aren’t tons of spaces that would even be suitable. Still in the earliest stages of planning right now…

On Sunday, May 17, 2015 at 4:16:22 PM UTC-7, Stephanie Miles wrote:

Hello all. I’m new to the group, at the very beginning stages of opening a coworking space in Redding, CA. (pop. 90,000)

I’m considering buying a commercial space for my coworking business, rather than leasing. Obviously it’s a big financial investment up front, however based on looking at the market here, it seems like the monthly payments on a commercial real estate loan would be less than the cost of a lease on a similarly sized space. (I’m looking at pretty run down industrial spaces, with the plan to renovate.)

Wondering if anyone else has done that and what unexpected issues, challenges, or even benefits you faced by doing so?

Visit this forum on the web at http://discuss.coworking.com


You received this message because you are subscribed to the Google Groups “Coworking” group.

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The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://dangerouslyawesome.com/podcast

Visit this forum on the web at http://discuss.coworking.com


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