Home > Real Estate > I Bought A Building This Week

I Bought A Building This Week

being a commercial landlordIt’s been a fun week. I did some laundry, got a haircut, and, oh yeah, bought a commercial building. Before you think I’ve lost my mind, it really wasn’t that big of a deal. I’ve owned half of the commercial building that holds my optometry practice for almost ten years, and this was just the other half of the purchase. Commercial real estate is a bit different that residential. It has pluses and minuses, but it makes sense if you are your own tenant.

Keeping the Tax Man Away

One thing I didn’t really understand or ever think about before owning a brick and mortar business was that you can own your own building and still pay yourself rent. It is a good way to take income out of the business without having it taxed as part of your salary. In reality, smart business owners would like their net income to be zero or even show a loss.

That doesn’t mean you aren’t making money. It just means that you are running as many expenses as you can through the business so that it helps with income taxes. For example, I use my cell phone to take emergency after hours calls, so that expense goes through the business. When we owned a satellite office, a percentage of my pay came from mileage to and from that office. You can also run some of your vehicle expenses through a business. We hired my daughter as a model for an advertising campaign. It’s important to have a good accountant to make sure you report expenses and income accordingly, but why give Uncle Sam more tax money than you have to? The government has proven time and time again that they are not using our tax dollars to anyone’s full advantage.

Seller Financing a Real Estate Purchase

Back to the building sale, I offered to buy the other half a few years ago, but the owner wasn’t ready to sell. He changed his mind recently, and we signed the intent to purchase earlier in the week.  We will close in mid-December. Just like with the first sale, he will be seller financing the purchase, so there are minimal closing costs,  and no lenders or credit reports needed. I feel like his interest rate of 4.74% was generous, as bank rates would be at least a point higher.

Seller finance is how I’ve been able to buy my business and building, and how I hope to sell the practice at the end of the year. It wouldn’t work for everyone, but at this point the seller and I have been partners in some form for over a decade, and he knows I’m a good bet. He is able to offer a sale price somewhat below market value because he will also make money on interest.  If I do default, he takes back the property, but it would take something catastrophic for that to happen.

Six Years and the Title is Mine

One downside or upside to seller finance is that the terms are usually based on whatever the seller wants. For this purchase, he wanted a six year term. I had two years left before paying off the first half, so that balance will be rolled into this loan. The negative is that the payment is pretty high, and I am breaking my own rule about positive cash flow for the next few years. The rent will cover the loan payments, but the taxes, insurance and any repairs will put me in the negative.

The upside to this is that I will own this building outright in six short years. You really couldn’t pick a better location for a commercial building. There is tons of parking. There are other doctor’s offices nearby, and the lot is just really pretty.  The current rent is right around $32oo per month, and regardless of whether my business sale goes through or not, the tenant  (our optometry practice) has been there since 1941, so I think it’s a safe bet that it stays rented. I’m pretty happy about that.

Does this mean I want to buy more commercial property? No way! I think it can be a good investment, but residential rentals are a safer bet in our area. We are still on the lookout for the next one, and will hopefully be able to jump when it comes along. Obviously, I ran the numbers backward and forward for this purchase, and it made perfect sense to move on the deal quickly. If you can get to the point where you have no consumer debt and aren’t broke, it gives you so many more options. Maybe you don’t want a rental property empire, but whatever your goals are, it’s so much easier to make them happen if you are in good financial shape.

What is your take on commercial property? Would you ever consider seller finance?


About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. Awesome. We’ve looked at different commercial properties, but have never pulled the trigger on any. What kind of business is in the other half of your building?

  2. This was the first time I’ve heard of someone I know using seller finance, but then again I don’t know many people who have bought commercial real estate. It’s definitely cool that you will eventually own the building free and clear, and certainly will be a nice asset to have on the books. I prefer residential real estate but my only reasoning is that I know little about commercial real estate.

  3. This sounds like the perfect deal for you, Kim, and I would definitely consider a similar deal. Sounds like way safer of a bet than many commercial real estate purchases. Great job!

  4. Very cool Kim! I think if you have the opportunity to do it and can swing it then go for it. I’ve only heard a little about seller financing, but you can’t beat owning it outright in six years and anyway to keep taxes at bay is a plus in my book any day.

    • Let’s hope it works out like I hope. Seller financing is awesome if you and the other party have a good relationship. It could always go south, but as long as it’s all in writing and you do the paperwork correctly, you just take back the asset if the buyer defaults.

  5. Love the thinking here. There is so much room to navigate the tax system to your advantage and it really pays off to maximize that ability. I really know very little about real estate, particularly commercial real estate, but it sounds like you were able to score yourself a nice deal.

  6. I would certainly consider it. Why not?

    I truly hope that it works out the way that you want it to!

  7. Thanks for writing this post about commercial property. I feel like all I ever read about is residential and I find commercial so interesting. It does feel riskier because there are some properties near me that have been vacant for years. That seems less likely to happen with homes.

    • Commercial is much more tricky because you can have a tenant then their business goes south and they can’t pay. They may have already redone the whole space to their specs and then new potential tenants will have to redo it again. At least with residential, people always need a place to live and a coat of paint and some cleaning is all you need to turn over a property.

  8. Wow…buying residential real estate and now commercial property…you are becoming a real estate mogul! =) I could never afford commercial property in NYC, I can barely afford residential real estate. It sounds like a good plan in your situation as it comes with some tax benefits. It definitely makes sense to be your on landlord…hey you are in control of the lease terms and the rent!

    • If the practice ends up not selling, I am going to really raise my rent! I do feel for anyone in high cost of living areas. It seems the only people who can afford to own commercial property are really crazy and hard to deal with as landlords, at least in my experience.

  9. I think this worked for you because you already had half the property. I wouldn’t touch commercial real estate because it is so complicated. I think you did a wise thing and hopefully it becomes lucrative for you.

    • I would not seek out commercial rentals, but this one makes great sense. I almost bought a commercial property in Telluride years ago, but there are so many taxes and fees and flaky tenants there that I’m really glad I didn’t.

  10. It actually sounds like a really safe, really positive transaction between two people who trust each other. Congrats!

  11. If the tenant is stable and triple A, it is a great investment. If the tenant is less, you can charge more and still do quite well. It should be a little like clipping coupons.

  12. Any time I can do direct sales, I would go for it, although I’m curious about the application to residential sales.

    For example, I understand that you’d easily be able to deduct the interest he charges you as a business expense. But if you were to live in this building, would you be able to take it as a mortgage interest deduction?

    • I’m not sure how it works if your property is labeled commercial and residential. I would think you’d have one loan and could probably deduct it however is suited your needs best, but I’m not sure. That’s a good question.

  13. Congratulations! Can you charge yourself $1,000,000 in rent or does the taxman make sure your rent is market standard for the neighborhood?

  14. Great pick up Kim, if nothing else you keep the seller from making a deal with someone else, you had to buy it!

  15. This looks like a perfect option for you Kim – congrats on the deal. I’ve never done seller finance, but it does seem like a good option (and specifically when your rate is below the bank rates offered).

  16. Since I work from home I have no need for such purchases. But it makes sense to purchase the entire building to use it, especially since your business is already there and used half of it. Congratulations 🙂

  17. congrats on the buy! I never knew that commercial real estate sale terms were varied and based on the seller–that’s interesting. It seems that even if you retire from working you’ll still do well as a commercial space owner with your new buy.

    • My seller is financing the loan, so he gets to set the terms. He is essentially the bank in this transaction. If we did go through a bank, it’s much harder to get a commercial loan. You have to present a business plan and put down at least 25%, plus the rates are higher.

  18. “Keeping the Tax Man Away”. Hilarious, very good for you Kim!

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