Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

July 2, 2020

Buying a Business: Deciding Whether to Buy the Commercial Real Estate

By Achim Neumann

buying commercial real estateOne of the key decisions faced when buying a business is whether to buy the commercial property associated with it. For investors presented with this option, there are certain advantages and disadvantages that come along with owning commercial property that should be considered.

To help you work out whether to use the old property or move operations somewhere else, we have put together this series of questions that you should ask yourself as part of the decision-making process.

Is it financially viable? `

Undertaking the purchase of a business involves a significant financial outlay. Assuming ownership of the building in which it is based can see overall costs increase significantly. You will be saddled with mortgage payments, extra insurance costs and the costs associated with maintenance. If you are already pulling out all the stops to gather together the money to afford the buyer’s selling price, it may not be financially viable to acquire the commercial property as well.

However, if you are keen to keep the business in the same physical location, it may be a better option to work out a rent-to-own deal with the seller for the short term. You may then be able to agree a deal to buy the property once you have set up and started making a profit from the business.

What would the advantages/disadvantages be to the business?

It is understandable to be cautious about committing to a rental contract immediately after assuming control of a business. It may be an attractive option to buy the commercial property associated with the business outright, but you should ask yourself a few questions first. You will need to work out whether the property will improve your future growth prospects. There may also be some opportunities for income derived from rentals that may be beneficial and provide you with an alternative source of income that you can funnel back into the business.

Can the business survive without the building?

The building in which the business is currently based has probably undergone specific modifications to help the business work more efficiently. If this is the case, moving to a new property may pose significant issues since some landlords are reluctant to permit drastic makeovers due to fears that it may damage rental prospects should you decide to move to a new property further down the road. Other landlords may be fine with such a makeover, but will look for an increased rate for letting it go ahead.

If your business requires a customized space in which to operate, then purchasing the property the business is based in may make sense. Moreover, you might use the fact that the building will not have to be renovated as a bargaining chip with the landlord if you are assuming control of a business that currently occupies a rented space.

Another factor is customer traffic: relocation might not be an option for retail operations that obtain a significant portion of revenue from walk-in traffic, or for businesses, where a new location would be inconvenient to its customers

Will it be possible to rent some of the space to a third-party?

As mentioned previously, one potential benefit of purchasing commercial real estate currently occupied by the business is that you may be able to generate rental income by leasing space to other businesses. However, you should only do this if you are willing to deal with the responsibilities and complications of becoming a landlord yourself. While the prospect of increased revenue is attractive, you should make allowances for the fact that outgoings will also increase with insurance and maintenance costs.

When acquiring a new business, you should carefully consider whether buying the building in which it is based is a shrewd business move. Into your decision, you should factor in your current financial situation, motivation for buying the property and whether or not you are ready to assume the extra challenges of owning a commercial space.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

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“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

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“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

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“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

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Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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