First World Problems
There comes a time when it makes more sense to buy rather than rent. Often, that calculation is financial. Sometimes, it's situational.
fun business fact: most commercial leases are what's called "triple net" or "NNN" which means "net insurance, net maintenance, net taxes" which is another way of saying "the landlord is going to stick you for abso-fucking-lutely everything." NNN is rarely published, the rate you see is just the lease, and it's usually in dollars per square foot per year. So in order to figure out your rental payment you're already in Excel and you can't even fill in the values until you get the NNN number.
And how do you get the NNN number? See here's the great thing. Unlike residential stuff, which is on readily-browsable databases and is fundamentally open, commercial listings are often held by brokers who don't list shit publicly. Yeah some of it is on Loopnet but even Loopnet shows only a selection. Some of it is on Craigslist but you can basically dismiss that shit out of hand because it's all Fisher Price My Very First Office bullshit. So you're already engaging with one, two or three parties just to get the number.
You might think that NNN number is highly variable, but again, we do everything "per year" which means whatever this year's number is reflects the accumulation of last year's charges divided by square footage. The clever among us might now notice that there's a built-in incentive to... you know... not do maintenance if you expect to need to sign new tenants next year (which are typically on a 5-year lease with an inflation adjustment and two five-year extensions). And if you think you might want to sell the building in the next couple years, it behooves you to not sign those leases because it will increase the delta between your rent roll and your proforma - the "how much money would you be making a year if you leased this whole turkey at current market rates."
How do you buy such a thing? Well, typically you get a commercial mortgage, which is like 30% down and typically has interest-only payments for five years and then has a balloon payment of the whole fucking nut after five years and oh by the way the interest is calculated on ten, fifteen, twenty year horizons but this stuff tends to fly because you aren't buying commercial real estate unless you're rich.
You can, of course, buy real estate through the Small Business Association. Their terms are substantially more normal. 10, 20, 25 year terms, 10% down, rate anchored at 2.75% over prime. You have to occupy 51% of the building within a year of purchase, though. We're currently 21%. Of course, nobody checks. My real estate guy has a client who used an SBA loan to buy a building downtown that he immediately leased out to a couple grow ops.
So why would you put up with this shit if you weren't screamingly wealthy? Well, maybe your landlord has decided that since you're the only one using the sign, you should pay for 75% of it and if he feels like using more than 25%, he'll just take it. Maybe your triple-net is 50% over the average and your landlord knows it and rather than taking one for the team because of his 10 years of deferred maintenance, he just uses the internet to turn everyone's thermostats down so the heating bill is lower. Maybe he's decided that snow removal might technically be part of the triple net, but since you're the only one who's in the office when it snows it should all come out of your end. Maybe his inability to get anything better than the fuck-you price from anyone he deals with has led to an exchange where he texts you "if you think you can do a better job running the building why don't you buy it" at which point you say "because every time I offer you say there's nowhere to put the money" and he says "anything is available for a price" so you say "so give me your rent roll your proforma and your capex and we'll talk."
maybe your landlord sucks so hard at landlording that he's on the verge of going bankrupt
maybe your competitors are closing all around you because this pandemic has been absolutely brutal to the healthcare industry
maybe your colleagues are pleading with you to buy out other practices to keep them from going dark
Maybe a bunch of shit but the bottom line is you're looking at multi-million-dollar decisions in order to reduce your annoyance, and that shit's fucking whack yo. Musk? Buys Twitter to win internet arguments. Me? Looking hard at buying the building so that the landlord can't just wander in and stare at everyone's tits.
I only bring this up because our business is not making us rich, but it is feeding eight families and paying a lot in taxes and keeping babies healthy and all that saccharine shit and here's normie me, with a spreadsheet of profitability and listen close chilluns
EVERY TIME JEROME POWELL RAISES RATES A QUARTER POINT, MY POTENTIAL MORTGAGE ON THAT BUILDING GOES UP $400 A MONTH
Which, despite the fact that I've been paying entirely too much attention to finance bullshit for entirely too long, was the first thing that really solidified "interest rates" for me. Because since October, my potential mortgage payment on that bulding has gone up two thousand dollars a month.
Multiply times the economy.