Comments on: Getting loans and thinking about buying an office http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office We love the web! Thu, 28 Aug 2008 01:54:43 +0000 http://wordpress.org/?v=2.0.5 by: Darren http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-9732 Thu, 31 May 2007 22:26:51 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-9732 Instead of owning the property, you could lease more space than you presently need (3x or 4x), and then "sub lease" the space. It would let you get your feet wet with property management without actually owning a mortgage (and a leaky roof, leaky old pipes, asbestos, etc). If you buy more footage than you need, you might be able to negotiate a lower price per sq ft -- then turn around and try to sublease it for a profit. If you're sucessful, take over more space in the building. the trick, as always, is to get in on favorable terms. Instead of owning the property, you could lease more space than you presently need (3x or 4x), and then “sub lease” the space. It would let you get your feet wet with property management without actually owning a mortgage (and a leaky roof, leaky old pipes, asbestos, etc).

If you buy more footage than you need, you might be able to negotiate a lower price per sq ft — then turn around and try to sublease it for a profit. If you’re sucessful, take over more space in the building.

the trick, as always, is to get in on favorable terms.

]]> by: Alex Walker http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7501 Mon, 14 May 2007 08:59:16 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7501 Really interesting post and some insightful comments. We have 500 sq ft of office space in the City (London) and your £500 pcm is a bargain in comparison to what we pay. However, our location is part of the business model and our lifestyles so I don't resent paying rent and high rent at that. I agree with John's comment about your misperception of 'throwing money away on rent'. As a growth company renting gives us flexibility, saves me from the 101 hassles that come with building management and is just another row in the overheads spreadsheet like everything else. I think John's comment about obsession with property in Britain as true. Napoleon called us "une nation de boutiquiers" (a nation of shopkeepers) and over 200 years on, his quote still holds true to some extent when it comes to attitudes to property. I also couldn't let this slip, a four day week and you run your own 'growing business'? Hmm. Really interesting post and some insightful comments. We have 500 sq ft of office space in the City (London) and your £500 pcm is a bargain in comparison to what we pay. However, our location is part of the business model and our lifestyles so I don’t resent paying rent and high rent at that.

I agree with John’s comment about your misperception of ‘throwing money away on rent’. As a growth company renting gives us flexibility, saves me from the 101 hassles that come with building management and is just another row in the overheads spreadsheet like everything else.

I think John’s comment about obsession with property in Britain as true. Napoleon called us “une nation de boutiquiers” (a nation of shopkeepers) and over 200 years on, his quote still holds true to some extent when it comes to attitudes to property.

I also couldn’t let this slip, a four day week and you run your own ‘growing business’? Hmm.

]]> by: DDias http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7226 Sat, 12 May 2007 14:22:07 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7226 I'm with Aaron. We've been in business 11 years and although we have the resources to buy business premises outright, we've never considered it a sensible use of capital. £500 pcm rent for 5 people is cheap - you should be thankful you don't have the overheads of London based businesses! Managed offices are generally expensive compared to leasing in my experience. I have a few rental properties in the north of England, and it's becoming such a distraction and headache for me that I'm looking to sell up in the next few months. Running a high growth web business + raising a young family (I'm guessing this is on your agenda at some point) + running property business = does not compute. I’m with Aaron. We’ve been in business 11 years and although we have the resources to buy business premises outright, we’ve never considered it a sensible use of capital. £500 pcm rent for 5 people is cheap - you should be thankful you don’t have the overheads of London based businesses!

Managed offices are generally expensive compared to leasing in my experience.

I have a few rental properties in the north of England, and it’s becoming such a distraction and headache for me that I’m looking to sell up in the next few months. Running a high growth web business + raising a young family (I’m guessing this is on your agenda at some point) + running property business = does not compute.

]]> by: Damon http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7078 Fri, 11 May 2007 14:47:52 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7078 One more thing - You better be getting a LOT more than 4-5% on your money in real estate. Levered, we look for 12-25%, depending on the risk in the deal. By comparison, 3 month US treasuries are making 4.7% now - risk free and almost perfectly liquid. One more thing - You better be getting a LOT more than 4-5% on your money in real estate. Levered, we look for 12-25%, depending on the risk in the deal.

By comparison, 3 month US treasuries are making 4.7% now - risk free and almost perfectly liquid.

]]> by: Ian Nelson http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7077 Fri, 11 May 2007 14:41:39 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7077 Er.. £500+VAT over what time period? Er.. £500+VAT over what time period?

]]> by: Damon http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7073 Fri, 11 May 2007 13:25:37 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7073 Buying would almost certainly be a big mistake. Are you ready to start another business? That's what you'd be doing. Owning/managing a property is not as simple as collecting checks and calling contractors. Real estate is not a passive investment. And if you think you're throwing money away on rent, wait til you see what happens to your investors' money in a market downturn when you can't cover your interest because you levered yourself to your eyebrows. Another thing - if the UK market is anything like the US market, be prepared to wait months or years to find a property priced appropriately. And when you want to sell, you'll find it harder because you have no real rent to show them (only what you are paying yourself, which is bogus). I could go on, but you get the point. Do not understimate the expertise and experience needed to find, purchase, operate, and sell commercial real estate. It is a full time job. Buying would almost certainly be a big mistake. Are you ready to start another business? That’s what you’d be doing. Owning/managing a property is not as simple as collecting checks and calling contractors. Real estate is not a passive investment. And if you think you’re throwing money away on rent, wait til you see what happens to your investors’ money in a market downturn when you can’t cover your interest because you levered yourself to your eyebrows. Another thing - if the UK market is anything like the US market, be prepared to wait months or years to find a property priced appropriately. And when you want to sell, you’ll find it harder because you have no real rent to show them (only what you are paying yourself, which is bogus). I could go on, but you get the point. Do not understimate the expertise and experience needed to find, purchase, operate, and sell commercial real estate. It is a full time job.

]]> by: Gianpaolo D'Ambra http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7044 Fri, 11 May 2007 09:27:03 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-7044 Buying a property is an investiment. So you should consider it like so. There is a easy little formula called "Net Present Value", "NPV" (you could find it also in Oo spreadsheet), that could help you. I try to expain it in a easy way: You should consider: - initial investment - cash flow - cost of opportunity - years for break-even Cost of opportunity is the value of how much you are good to make money. In your case is the Return on Equity of Carson Systems. Ex: If you invest 10k every year on CS, is the percentage of how much you gain(5%, 15%, 40%, etc..). You should calculate Cash Flow like this: Income (if you rent half office) "less" month rate(new loan rate "less" old rent rate). Easy Example: Possible Income: £600; Old rent rate £500; New loan rate £700. I've not considered VAT for simplicity. Cash Flow = 600 - (700-500) = 400 You have to decide also in how many years you want to end your investment. The formula is in this link. http://upload.wikimedia.org/math/3/8/2/3824d93f9d472d3ba000c290ddaa5bf3.png If your NPV is positive, buy your office. I Hope to have explained it simple and sorry for my english. http://en.wikipedia.org/wiki/Net_present_value Buying a property is an investiment. So you should consider it like so. There is a easy little formula called “Net Present Value”, “NPV” (you could find it also in Oo spreadsheet), that could help you. I try to expain it in a easy way:

You should consider:
- initial investment
- cash flow
- cost of opportunity
- years for break-even

Cost of opportunity is the value of how much you are good to make money. In your case is the Return on Equity of Carson Systems. Ex: If you invest 10k every year on CS, is the percentage of how much you gain(5%, 15%, 40%, etc..).

You should calculate Cash Flow like this:
Income (if you rent half office) “less” month rate(new loan rate “less” old rent rate).
Easy Example: Possible Income: £600; Old rent rate £500; New loan rate £700. I’ve not considered VAT for simplicity.
Cash Flow = 600 - (700-500) = 400

You have to decide also in how many years you want to end your investment.

The formula is in this link.
http://upload.wikimedia.org/math/3/8/2/3824d93f9d472d3ba000c290ddaa5bf3.png

If your NPV is positive, buy your office. I Hope to have explained it simple and sorry for my english.

http://en.wikipedia.org/wiki/Net_present_value

]]> by: andrew http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6983 Thu, 10 May 2007 23:03:22 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6983 Buying a property makes no sense & neither does a 4 day work week, unless as you say "it's a quality of life" mindset rather than a "grow our business, get rich and retire" mindset. Neither mindset is right nor wrong. Buying a property makes no sense & neither does a 4 day work week, unless as you say “it’s a quality of life” mindset rather than a “grow our business, get rich and retire” mindset. Neither mindset is right nor wrong.

]]> by: John http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6971 Thu, 10 May 2007 20:27:31 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6971 I think you have sold this to your self, and try as you can, you are well into cognitive assonance mode. However it does seem to me that you may have succombed to the British disease, which is a cancer in their economic system, of thinking that property is a one-way bet on future prosperity. You think you are "throwing" your money away on rent - what about money you throw away on webhosting? on staff? on X, Y, Z? By all means get a good or better deal on the office, but don't get seduced by the British obsession with the paper profit of rising house prices (and office space). Good luck. I think you have sold this to your self, and try as you can, you are well into cognitive assonance mode. However it does seem to me that you may have succombed to the British disease, which is a cancer in their economic system, of thinking that property is a one-way bet on future prosperity. You think you are “throwing” your money away on rent - what about money you throw away on webhosting? on staff? on X, Y, Z? By all means get a good or better deal on the office, but don’t get seduced by the British obsession with the paper profit of rising house prices (and office space). Good luck.

]]> by: Ryan Carson http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6914 Thu, 10 May 2007 06:58:58 +0000 http://www.carsonified.com/misc/commercial-mortgages-and-buying-an-office#comment-6914 I'll give ya'll an update after I talk to Nick. (Can't believe I said "ya'll". You're going to think I'm from Alabama or something!) :D I’ll give ya’ll an update after I talk to Nick. (Can’t believe I said “ya’ll”. You’re going to think I’m from Alabama or something!) :D

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