La Habra, a city in Orange County, CA’s northwestern portion, had a population of 60,239 in 2010. It is related to La Habra Heights, which is to its north, but that is part of Los Angeles County rather than Orange County. The city gets its name from the natural pass through the hill, which is found on the north of the city and was used on July 30, 1769 by the Spanish Portola Expedition explorers.
By 1839, La Habra was part of Alta California. It was home to thousands of horses and cattle. In that year, 6,698 was granted to Mariano Reyes Roldan, who named his ranch Rancho Canada de la Habra. This was then purchased by Abel Stearns towards the end of the 19th century. Today, the city continues to be quite rural in nature.
The city’s main employers are CVS Pharmacy, Wal-Mart, the City of La Habra, Target, Costco, La Habra Bakery, Kohl’s, The Home Depot, La Habra Convalescent Hospital, Lowe’s, and VIP Rubber.
La Habra Commercial Buildings for Sale & Lease – Which One to Choose?
La Habra has an interesting and growing economy and there are quite a few options for those who are interested in becoming a part of it. For instance, property investors are attracted to the city when looking to purchase commercial real estate (CRE). CRE can also be purchased by those who don’t want to invest in property but want to run their business out of it. For them, the other option is to lease a property. It can be very complex to choose between leasing and purchasing, not in the least because there are significant advantages and disadvantages to both options. Financial experts generally advise businesses to buy if they intend to operate out of it for a period of seven years or more, but this is not always a possibility.
The financial obligations that are associated with mortgages and leases are about more than simply what the monthly mortgage or lease payment is. Both options come with various tax advantages, there are associated costs with both options, both a mortgage and a lease require a down payment of sorts, both have certain limitations in terms of what can be done with the property, and more. Hence, it is very important to understand the advantages and disadvantages of both options before coming to a decision with regards to commercial buildings for sale & lease.
La Habra Commercial Property for Sale – Trends in La Habra
One way to start comparing your options, whether you want to run a business or make an investment, is to look at the CRE trends. For La Habra:
- Multifamily properties in the county usually cost around $314,841.90, which represents a mere 0.7% rise during the last three months but a 10.5% increase in one year.
- Office properties in the county usually cost around $311.66 per square foot. This is a quarterly decline of 0.2%, but an 11.3% increase in one year.
- 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 not changed over the past quarter. Year on year, however, the cost has increased by 14.5%. If you own retail property, you can usually charge $16.62 per year per square foot in La Habra. This is a 0.6% decrease over the past three months, but a 2.7% increase over the past year. These prices are lower than in the state, county, and metro areas.
La Habra Commercial Property for Lease – Some Tiips
In many cases, the only choice for business owners wanting to operate a business in La Habra is to lease a CRE property. This type of property is often expensive, and there is usually not enough capital available, particularly in startups or small businesses, to purchase it, particularly since they usually have to put down 30% of the purchase price if they are to be accepted for a mortgage. That said, getting a commercial property for lease requires a complex legal agreement, and it is important that all options are considered properly. This starts by finding a broker.
Which Broker to Choose
There are two types of brokers, which are the leasing agent who works mainly on behalf of the landlord, and the tenant broker, who works mainly on your behalf. However, while a tenant broker sounds like the better option, such brokers also want you to sign a representation agreement, which means you can only see those properties that they have in their list. Since the landlord will generally pay the broker fees, it is important that you consider which one you feel will work better for your needs.
Get a Lawyer and an Accountant Too
The broker is important, but so is a lawyer and an accountant. This is your team of professionals who will ensure that you get the best possible deal on your lease. Unlike with a residential tenancy, you can actually negotiate on the different points of your lease contract. In fact, the first contract you will be offered will be heavily skewed in favor of the landlord, who expects you to negotiate on the points, but hopes that you won’t. You need a lawyer to make sure that every element of the contract is legal, and you need an accountant to make sure you can afford the suggestions that will be made backwards and forwards. Some of the points to negotiate on are:
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease, and what this is based on
- The type of lease 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 would be based on, and how much is the maximum increase
- Who has responsibility for maintenance
- To what extent you are able to change the inside of the building and who will shoulder 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 need to terminate the lease prematurely
- 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 amount of security deposit
What the above list demonstrates is that it is truly important to have professionals around you working specifically for you. It also shows that a lease really is a complex legal agreement. None of those issues are of concern to you should you decide to buy a commercial property for sale. In that case, the property is yours to do with as you please, within the limitations of building codes, local ordinances, and whether your building is listed as a historic property. If you purchase, you can also decide to sublease it in part or in full, or sell it if property prices rise and you stand to make a big profit. However, making that purchase is not possible for everybody.
Investing in Commercial Buildings for Sale & Lease
Commercial real estate is a good investment because it has low risk and high potential yield. This is due to the fact commerce will always exist, regardless of how the economy is doing. Shopping, in particular, is one of the strongest economic drivers. While the commercial sector can be affected by a downturn in the economy, it does usually survive and it does usually pick itself back up quickly. Furthermore, owning CRE property gives you a security blanket because if your own business were to fail, you could still decide to lease the property out and earn an income, at least sufficiently to make your mortgage payments.
However, there are some drawbacks as well. One issue that you will have to deal with is zoning. Zoning ordinances are in place to make sure only certain types of industries can be run in certain areas. This prevents a doctor’s office from opening in the middle of a chemical factory, for instance. But a bigger problem with purchasing a CRE property is the 30% down payment that has to be made. This is the type of money most people do not have access to. One way to solve this problem is to join a commercial real estate investment trust. Essentially, this means that you get to invest in properties, but you don’t get to use them or become a landlord for them.
Conclusion
Clearly, there are a lot of considerations to make when it comes to choosing between a lease and a purchase. Make sure that you seek out solid professional advice to help you make your decision. Consider not just the immediate impact on your finances, but also the long term aspects.