I have been in business for just about 5 years now, and the backyard barn that I built is no longer big enough. I built the shop at the time so I wouldn't have to find a rental, and could be close to home to help out with the kids. The shop I built was supposed to be larger, but we couldn't make it my ideal size due to lot restrictions.
Now that I have outgrown this space, I am looking at buying a building. The problem is that most of the buildings in my area are much too large for me, and therefore too expensive.
There are some "condo" type flex units for sale, but I am not real sure that those make sense. The thought of dealing with a condo association, and having neighbors that I cannot control, does not seem like a great situation.
I have seen a few freestanding buildings available within a 30 minute drive, but I was hoping to be closer to home than that. I am used to walking out the back door of my house 100' to the barn.
Does it make sense to buy a larger building than I need, and try to lease out the extra space for now, and know that I might grow into it down the road? I really don't want to rent if I can help it, and I figure buying a building in this economy may be good timing. Down the road, the building could be part of my retirement income when the real estate market turns around.
(Business and Management Forum)
From contributor M:
It doesn't matter how big your building is. You will eventually fill it full of good buys that improve your capability and/or speed and need a larger building. I would definitely get the building that is bigger than I need - as long as I could afford it. Do not count on being able to rent the excess. I am getting ready to triple my space.
I would not buy a condo style shop, because if you don't like the kind of business that moves in beside you, you are out of luck. Are you lacking storage space in your existing barn? Maybe you need a Sea-can, just to store stuff.
Another downside was the potential neighbors' businesses. If one of them ran a sloppy shop and their building burnt to the ground, guess what would happen to mine? It would be gone also.
I finally purchased an existing metal warehouse building that was larger than I needed. I thought about renting out the excess space but after doing a ROI calculation on the cost of dividing the building, adding new bathrooms, separate entrance door, new electric meter and wiring, etc., I decided not to rent it out. It would have taken a number of years to break even on the initial expense. Also, I still had the fear of my tenant being sloppy and the building going up in smoke.
And guess what happened with the extra space? I found lots of ways to use it. For example, I didn't have to worry about having enough room for that 5'x10' frame vacuum press table, or my CNC router. I even park my trailer inside (preventing break-ins or a disappearance). And it is nice to be able to load/unload the trailer without concern for the weather.
Another great feature is the property location. My shop is about 10 minutes away from my target market. I now have a place where my clients can meet me that is extremely convenient for them. And I can get to them quickly also, saving me lots of time. My old shop (building on my own property) was 45 minutes away. Clients never came to visit.
The downside to buying, of course, is the monthly mortgage payment. But in my opinion, it is much better than paying rent. And I am hoping the real estate investment is a winner also.
I'm almost maxed out on the land now but could add a little more space - at a high premium, due to poor planning in the beginning. With each addition there were equipment moves and added electrical expenses that could have been reduced with better planning. I think there is an old Chinese proverb "one's junk will always exceed one's space." One of the few smart things I did was have OHD's on both sides of the building for good ventilation. The building is now paid for and I hope it will provide a nice retirement income.