In the business world today, most people want to own their own building. This mind set is part of the American way. However, owning your own building in this day and age is not necessarily in your companies best interest, especially now in the current banking environment and economic situation facing Northeast Ohio. 620 Corporation has done business in Medina for the past 80 years and has knowledge and experience that you can rely. Our business is based on a strong commitment to this community and our desire to help other businesses grow and succeed. Buildings today provide a relatively low return on investment compared to most other business operations. The reason for this is because most businesses today are experiencing a much greater turnover on their investments through other opportunities than what they would gain by owning their own building.
With that being said, there are some situations where owning your own building can be beneficial for your company. In Medina for instance, if the business operation in question requires a lot of lease hold expenses and it would require large amounts of capital in order to move or relocate. Also another reason for buying rather than leasing would be if the business is mature and the owner is looking for another investment opportunity. In this scenario the business owner purchases the building and then leases it to their company.
The greatest disadvantage of owning rather than leasing is that it usually makes your business harder to sell. This is because the acquiring company normally wants to consolidate the business into their own operations and the added value of the building is often more of a burden than an advantage. Secondly, if a company needs to expand, this is the worst time to add a greater investment in the building of an addition. In an expansion, cash is needed for equipment, additional employees, inventory etc. The cost of adding bricks and mortar buildings require a large amount of capital, and the economic client especially in Medina will not currently support this.
Another important financial obstacle to consider into the equation are tax costs. On the tax front, a company in Medina County can write off 100% of the rent it pays while it can only write off or depreciate about 2 ½% of the capital cost each year that comes from ownership. With that being said, the interest on the loan taken out to purchase the building can be written off also, but the capital is depreciated over the next 39 ½ years.
Finally, it is important to consider the policies that Banks in Northeast Ohio are currently using to consider loan options. In Medina, the Banks are currently being very conservative about lending on any real estate whether it is an investment opportunity or owner occupied. It is in this area that we at 620 Corporation come into play. At 620 we can lease you a building, sell one of our buildings to you, build a new building or remodel your existing facility. In this uncertain Ohio economy 620 Corporation is here for your business to help provide a plethora of options to fill your real estate needs.
