Tips before you decide to buy a commercial real estate

Many professionals in Greece ask themselves whether renting or buying a professional space is the best option. The answer to this topic is not that simple. From the one hand, the interest rates are really low nowadays and the property prices have declined dramatically since the economic crisis started. From the other hand, business sales have also fallen with the result not to exist sufficient cash flows to seize the opportunities.

More analytically, deciding about a real estate purchase, current needs and potential future expansion of the company should be taken into account concerning the property area. In addition, a cash flow analysis should be conducted including current cash payment and loan payments which are indispensible for an immovable asset acquisition. Tax issues are directly related with the payments, as tax saving differs between rental and loan. Also, some of expenses, as depreciations and maintenance costs, can be used to reduce taxes.

Moreover, the region selection and the determination of a “fair” price are of much importance, as a building should appreciate with time and not diminish in value. For instance, remarkable office buildings are situated on Sygrou or Kifisias Avenue which will probably never be depreciated. Additionally, center of Athens offers special opportunities (Ermou Street, Stadiou and Panepistimiou Avenues) as many properties are undervalued and a price increase is expected. This event could ensure a high resale price in case of willing not to hold the property for a very long period and pursuing an exit strategy.

Some disadvantages should also be noted in order to obtain a global view of a commercial real estate purchase. Firstly, the engagement of some future cash flows for mortgage payments may limits financial flexibility concerning taking advantage of future business opportunities that may arise. The cost of capital in Greece is high, but if the company can use other sources of funds outside Greece, the turnover could be higher.

In conclusion, buying a commercial real estate in Greece is a complicated issue and many factors must be taken into account. Consequently, in order to get involved in such a transaction, the best solution is to get advice from a professional real estate advisor who is aware of the market, consult an experienced lawyer and last but not least be sure to obtain valid information from a professional financial advisor about your tax situation.

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