Orange County, CA, is home to the city of Laguna Woods. According to the 2010 census, its population was 16,192 at that time. Interestingly, this showed a slight drop since the census of 2000. One of the reasons for this is that it is very much a retirement community, with a median age of 78. The median household income according to the 2010 census was $36,818.
About 90% of the city is Laguna Woods Village, formerly known as Leisure World, which is a retirement community. In the late 1990s, there were some incorporation efforts because residents wanted to prevent the building of an international airport at the disused El Toro Marine Corps Air Station. The proposal to turn it into an airport was defeated, and it is likely that the land will be developed into Orange County Great Park.
Laguna Woods Commercial Buildings for Sale & Lease
The economy of Laguna Woods is unique in as such that it is very much a retirement community. As such, there is a significant need for services for the elderly, including things such as medical clinics, physical therapy, and pharmacies, but very little need for regular entertainment, shopping, and dining. Because of this, it is not an overly popular area for commercial property investors. That said, there is always the potential to purchase commercial real estate (CRE), either to become a landlord, or to start a business in it. In the latter category, the alternative is to lease a property, and deciding which one of the two options is best – purchase or lease – is a very complex decision to come to.
When considering the pros and cons of the Laguna Woods commercial buildings for sale & lease options, it is important to look further than simply the cost of the monthly lease, or the cost of the monthly mortgage. For starters, both require a degree of investment capital for either a security deposit, or a down payment. Secondly, both have their own specific tax advantages, as well as a wealth of other associated costs, including insurance, utilities, and renovation. Hence, it is vital to get professional help in order to determine which of the two options is best for you.
Laguna Woods Commercial Property for Sale
One place to start with comparing your options, whether you want to run a business or make an investment, is in trends for Laguna Woods commercial property for sale:
- Multifamily properties in Orange County usually cost around $314,841.90, which is a 0.7% rise compared to the last three months, and a year on year increase of 10.5 percent.
- Office properties in the county usually cost around $311.66 per square foot. This is a quarterly decline of 0.2%, although a 11.3% year on year rise.
- Industrial properties in the county usually cost around $222.13 per square foot, which equates to a quarterly rise of 2.7% and a year on year rise of 10.9%
- Retail properties usually cost around $408.88 per square foot, which has been stagnant over the past quarter. Year on year, however, this is a 14.5% increase.
Laguna Woods Commercial Property for Lease
In many cases, leasing CRE is the only real option. In Laguna Woods, one reason for that is the availability of property. A second reason is that a 30% deposit is required in order to be considered for a CRE mortgage, which is more than most businesses can afford, as they need that capital to grow their own operations.
If you do want to go for a Laguna Woods commercial propert for lease, you need to start by getting professional advice from a number of different people.
Hire Some Professionals
First of all, you will need an accountant, who can make sure the financial side is properly looked into. Secondly, you need a lawyer, who will make sure you stick to all the relevant legislation, statutes, and regulations. Finally, you need a broker who will help you to find a property. Here, you have two different options. You can work with a leasing agent, who generally represents a single property developer with many properties, meaning you may need to request the services of multiple agents to see enough properties. The second option is to work with tenant brokers, who will have various landlords on their file. They will most likely want you to sign a representation agreement, however, which means you will not be able to view any property that is not on their books. In most cases, the landlord will pay for the broker fees, and the leasing agents will work mainly on behalf for the landlord, whereas the tenant broker will work more on yours. That said, there are many situations in which working with a leasing agent is still the better option.
Look at Various Properties
Once you have decided on your broker, it will be time to start looking at various properties. If you see a property that you like, take note that landlords will send you a preliminary lease agreement, which will be heavily skewed in their favor. However, unlike with a residential tenancy agreement, you will be able to negotiate on the majority of the points in your contract, which is something that many people are not aware of. This is one of the reasons why it is so important to have a good team of professionals on your side who understand the legalities and the financial implications of a lease. This would be the lawyer and the accountant, as previously mentioned. Some of the things that they can negotiate on include:
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease itself, and what that is based on
- The type of lease construction that is most beneficial to you (percentage lease, net lease, triple net lease, or gross lease)
- The duration of your lease and what happens when it comes to an end
- The possible rent increases, what they are linked to, and how much they are capped at
- Who is responsible for the maintenance of the property
- To what extent you are able to change the inside of the building and who will take care of the renovation costs
- Whether you can signpost your store on the outside of the building
- Whether you can sublease the space and, if so, under what conditions
- What types of exit clauses are in place should you want to leave early
- Your right to transfer your lease if you were to sell your business to a third party
- Specific clauses, such as exclusive use or co-tenancy
- The level of your security deposit
What About Purchasing the Property?
Clearly, lease agreements are highly complex documents with a lot of things to think about. If you were to purchase CRE, however, none of the above will matter to you. Rather, you will own a property with which you can do as you please, within the confines of three things:
- Building codes, as you must make sure that any renovations you make are safe and fit for purpose
- Local ordinances, such as not being able to change the facade of listed and historic buildings
- Zoning issues, which means you can only run certain types of businesses out of certain properties. You can, if need be, apply for re-zoning, but this comes at a significant cost and is not always successful either.
While a purchase may sound more convenient, therefore, there are two main issues to consider. The first is the lack of availability, which you will find is particularly problematic in Laguna Woods. The second, and often bigger issue, however, is that you have to make a down payment of 30% in order to be considered for a mortgage. This is a significant chunk of money that not everybody has access to.
CRE Is a Solid Investment
If you do have access to that kind of money, then CRE makes for a very solid investment. Even in times of economic difficulty, commercial properties tend to remain in high demand. While their value may drop slightly, it usually picks up again very rapidly as well. Furthermore, if you were to run your own business out of it, and your business contracts or even closes, you still have the property that you can sub-lease either in full or in part, thereby continuing to earn an income. When you eventually do come to sell your property, you are likely to make a significant profit on it.
That said, the down payment is an issue for most people, and putting in the time to be a landlord is something not everybody is capable of doing either. This is why you may want to consider investing in a commercial REIT (real estate investment trust) instead. Here, you basically pool your money and resources together with other investors, and properties are bought and sold, enabling you to enjoy the profits. While this does mean you will never be able to use the property for yourself as its owner, it also means that you do not have the concerns and difficulties of being a landlord, as the REIT holds responsibility for that element of the transaction.