Owner-Occupied commercial real estate is an attractive option for investors to build wealth. Why? Owner-Occupied commercial real estate (OOCRE) can benefit investors through advantages such as tax benefits, cost stability and asset diversification.
Read on to learn more about this top strategy for business owners building wealth.
What is Owner-Occupied Commercial Real Estate?
Owner Occupied Commercial Real Estate (OOCRE) occurs when a business owns and uses the commercial real estate (CRE) for commercial and operating purposes.
It’s typical for startups and small businesses to lease their CRE space with monthly payments. This, however, limits the business’ control of the space and leaves businesses vulnerable to:
- Rent increases
- Lease termination if the landlord decides to sell the CRE
- Regulations on how to use the space itself
How Does Owner-Occupied Real Estate Build Wealth?
Owning a CRE space instead of renting it helps business owners move closer to their bottom line. In the long run, OOCRE reduces costs and operational constraints.
Three ways OOCRE helps to build wealth include:
- Tax advantages
Owning your own CRE gives businesses an advantage come tax season. Businesses occupying their own CRE can claim deductions for interest on the property and may write off other building-related expenses and investments.
Those renting their CRE space are unable to use the building as a claim deduction.
- Cost Stability
Rental increases at the end of a lease can financially strain businesses. There’s never an “opportune” time to pay more rent.
Owning and occupying your own CRE property helps regulate the cost of monthly payments so businesses can focus on investing in growth in other directions.
- Asset Diversification
Diversify your business portfolio by adding the CRE investment property to it. CRE is a valuable asset to a business as an addition to the company’s equity.
What are the Benefits of Owner-Occupied Commercial Real Estate?
Commercial lenders are motivated to fund own-occupied loans. Why? The loan introduces additional financing/banking opportunities such as:
- Tenant Improvement Financing
- Working Capital – Line of Credit and or Term Loan
- Equipment Finance
- Partner Buyouts, Mergers, Acquisitions, and Expansions – Conventional and SBA
- Basic Depository to Complex Treasury Management Services
OOCRE is a win-win situation for the lender and the business seeking a loan.
Other benefits businesses receive when purchasing OOCRE include:
- Monthly mortgage payments replace monthly rent. The owner pays down the principle and builds equity.
- The commercial real estate asset appreciates, increasing equity.
- Seizing the opportunity to utilize building depreciation to reduce tax liability.
- Create the opportunity to leverage equity as collateral for future business lending needs.
- Real estate asset hedges inflation.
- There is potential to create rental income from leasing additional units.
- Business owners who buy the building they operate their company can lease the space to a new owner when they sell, creating cash flow in retirement.
- Provides an opportunity to refinance and pull cash out for additional investments.
- Compared to investing in securities, the client owns a tangible asset. The property does not walk away or become subject to investment fraud.
- Owning CRE has utility. It has a purpose either to provide housing or to house a business. It is not a speculative investment like Gold, Silver, or Crypto.
How Can Innovative Capital Corporation Help Businesses Seeking OOCRE?
We provide our clients with a strategic advantage to meeting their business and real estate goals. OOCRE, as mentioned before, is a popular financial investment for commercial lenders. We leverage your business needs to multiple lenders nationwide to find the best loan rate and term for your unique goals.
Partnering with us provides the knowledge, network, and technology to help your clients, shop lenders, receive multiple quotes, and negotiate the best loan.
Learn more about who we are, what we do, and what makes us different, here.