Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

August 23, 2016

What to know about buying a business with real estate

By Achim Neumann

Purchasing a business can be complicated process, especially for first timers. When this transaction includes real estate, things can get even more complex.
While some think that it is a good idea to own the land beneath one’s business, there are an equal amount of reasons why this might be a bad idea for the business owner.

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Leasing during the start up phase of a business just makes sense

The vast majority of business owners lease space for their business. Doing so gives them the flexibility to move whenever they feel the need, and it frees up capital that is crucial for the growth of their start-up.

Despite what many pundits say, real estate is frequently a liability rather than an asset. Real estate booms are usually a short-lived phenomenon; the rest of the time, prices go up very slowly, and maintenance and repair bills associated with property ownership can chip away at a company’s fragile bottom line. For these reasons, we recommend leasing during the early years of a business.

When does it make sense to purchase real estate for a business?

There are circumstances when it does make sense to purchase real estate for a business. Acquire property when:

(1) There is a need to lock down a certain location

Certain types of businesses need to be situated in certain parts of a town or city in order to succeed. If an entrepreneur wants to get into the boutique jewelry business, they would do well to locate themselves in a prime shopping district.

In situations where vacancies are scarce, a successful business owner might want to consider purchasing real estate for their business to avoid having to open their business in unsuitable locations, such as high crime neighborhoods or industrial parks.

(2) Controlling other tenants in the building is a top priority

When space is leased for a business, the business owner will often have no control over other tenants that take up residence in the building.

It may not be desirable to have businesses such as a smelly sandwich shop set up next door if the business owner in question deals in high-value clothing that sells for thousands of dollars a piece.

If a business owner has sufficient capital or financing at their disposal, then purchasing an entire building in order to control who rents out the other stalls might be a gamble worth taking.

Appraise the value of real estate apart from assets of the business

When a business owner with real estate puts their company up for sale, they will often lump the value of their property together with that of their business assets. When this situation occurs, it is prudent to appraise the value of business assets apart from the value of the property.

While this can be a time-consuming process, the extra effort taken will protect the buyer from paying a price that is out of line with what the property and the business is actually worth.

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 info@neumannassociates.com

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Client Testimonials

“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.”

Double Diamond

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

Dennis Frazier

“Working with Marc and his company was a pleasure. 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. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

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

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer
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Contact A Neumann & Associates, LLC

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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