As we discussed in our blog called: From Retirement to New Business Owner, there are many benefits for starting a new business after retirement, especially if you are doing something you love. There can also be financial, social and health benefits when starting a new small business. It is important however, to research the type of business you want to start. In this blog we will discuss the benefits of owning and leasing commercial property.
Why is commercial real estate/property a worthwhile investment after retirement?
Commercial property can offer a reliable source of income throughout retirement. Commercial real estate (CRE) can be an appealing investment that offers passive income and opportunities for growth. Also, retirees often have the money and the time to invest in commercial real estate. Banks, or lending institutions find retirees ideal candidates to lend money to and can offer attractive interest rates and creative financing options. The rent collected can help pay off the property and investors can leverage the property for loans to purchase additional income producing properties.
What should I know before purchasing commercial real estate?
Real estate can be a sound investment after retirement IF you go about owning it and running your business the right way. Here are a few things to get you on the right track:
- Get educated about buying and leasing commercial real estate.
- Run the numbers
- What will the property cost?
- What other costs will you incur?
- Will you manage the property yourself or hire a management company?
- Who will you lease to?
- When will you expect a profit?
- How much time will you need to invest?
- What are your strengths and weaknesses for this type of investment?
- Ask for expert help from people who are familiar with this type of investment. (Collin SBDC can help!)
- Consider location, potential tenants, other investors
Should you become a landlord in your retirement?
There are many advantages to becoming a landlord, or property owner in retirement, especially if you are considering purchasing commercial real estate. It is important however, to consider several factors about which businesses and individuals you want as tenants.
- Consider the right “mix” of tenants: do the businesses compliment each other so they will do well?
- Look at the demographics of your space:
- What amenities are nearby?
- What is your goal for the space and the tenants?
How do I find good tenants for my space?
Collin SBDC is a great resource for finding the right tenants to lease your retail space. We can offer free expert help and ongoing guidance for your new business venture. It’s important to consider a few things before obtaining a new tenant:
- Will my tenants be able to stay and pay their rent long-term?
- What will make my space attractive to potential tenants?
- How do I pre-qualify a tenant?
- What do I need to include in my lease agreements?
Can I use my 401K to buy commercial property after retirement?
Yes, you can and if you are over 60, you won’t have to worry about a penalty. There may be some limitations, however. Some 401K plans can have restrictions on how and when the funds are withdrawn and for what they are used. You may qualify for a ROBS roll-over to start your new business, or you may be able to roll your 401K over to a self- directed plan that allows you more flexibility. You may want to speak to your plan’s administrator and your accountant to invest your 401K in a new commercial property.
Many retirees find that investing in and owning commercial real estate can be a reliable source of income. The continued income stream can offer added financial security as well as a powerful way to keep your money working for you long-term. If you are interested in learning more about owning and leasing commercial real estate, contact us at Collin SBDC. We can help you decide if this type of business is right for you. Click here (hyperlink) for more information.
For additional resources and information on purchasing commercial real estate or on starting a business after retirement, please contact our experts at the Small Business Development Center – SBDC – serving Collin and Rockwall Counties, Texas.
Blog by: Michael McClinton