Buying a building for new headquarters leads to decisions

By |  August 9, 2017
If only it were as easy as merely sticking the word “Sold” on the sign. Photo: ©iStock.com/huePhotographyz

If only it were as easy as merely sticking the word “Sold” on the sign.
Photo: ©iStock.com/huePhotographyz

As I was standing in front of my new building the other day, talking to my architect, a homeless man sidled up to us. I figured he was going to ask us for a few dollars, but instead, he shook my hand and asked me whether I’d allow him to continue sleeping in his tent in the private alleyway on the west side of our building. He told me he would keep an eye on the building if I would allow him to sleep there. I nodded my head and told him I would love for him to keep watch on our building, but when construction began, he would need to leave for his own safety. He said thanks and walked on.

So, after three months of negotiating, homework, filling out applications and meeting with city officials, my first big decision as a property owner was to allow a homeless man to continue to camp on our property. I wonder if President Trump ever held these types of meetings?

As I discussed in my June column, my wife and I closed on our building this spring. Because of the very nature of the “Start-up Diaries” concept, I thought I would run you through the process. As I’ve stated many times before, I am not claiming to have done this the right way. All I can do is let you know what decisions we made, and you can compare it with what you have done or what you might do in the future.
 

You’ve got questions? I’ve got answers.

1. How did I know this was the right time to buy a building?

We ran out of room at our current rental. I did try to rent more space from my landlord, who owns a giant industrial complex, but the local economy is pretty good right now and he is sold out.

2. How many buildings did I look at before selecting my current building?

Five. The first building we wanted was located on a busy highway, which is exactly what I desired. I wanted to get as much free advertising as possible. The building was for sale at $199,000 and had lots of parking. The problem was it wasn’t much bigger than our current rental.

The second and third buildings sold as I was deciding on whether to put in a bid. The fourth building was an old U.S. Post Office, and it was great. But there were also many problems: The parking lot was a disaster, a retaining wall was falling into the parking lot, and the building itself was massive. Renovations on this building could have cost up to $600,000.

The building we ended up purchasing also is on a busy highway, near an equally busy intersection.

3. Where did I get the money?

I started Schopen Pest Solutions 11 years ago, and up until recently, I’ve never had money left over at the end of the year. We have always tried to use up every penny. Two years ago, though, we made a large profit and I had to pay a substantial amount of taxes. Still, I was able to squirrel away some of the money and carry it over into year 10. Last year, we made a huge profit. The taxes on said profit were enormous, but we still were able to save an additional $80,000, pushing our total up to $100,000 in the bank.

4. Is $100,000 enough for a down payment on a building?

Probably not, unless you go with a U.S. Small Business Administration (SBA) loan. Our 8,000-sq.-ft. building was originally listed for $299,000, which is a pretty good price for the Chicagoland area. We negotiated the bank down to $250,000. Our construction loan was another $261,000, pushing the price up to $511,000. Going with a conventional bank loan, I would have needed to come up with $112,200, which I didn’t have saved.

My banker, however, is an awesome businessman and I was able to secure an SBA loan. The SBA is a government-backed loan that requires just a 10 percent down payment, meaning I only had to come up with $51,100. When you add in closing costs, my out-of pocket expenses came to approximately $65,000 — well under my $100,000 budget.

Next month, I’ll discuss how we chose our “people” who helped us through the purchasing process. Without an experienced banker, accountant, Realtor, architect, contractor, lawyer and others, we would never have been able to complete this process.

Pete Schopen is president of McHenry, Ill.-based Schopen Pest Solutions. You can reach him at 847-529-BUGS or pete@schopenpest.com.

This article is tagged with , , , , , and posted in Business, featured

Comments are closed.