Frequently Asked Questions
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Q: What is an office or business condominium?
A: A condominium or "condo" is a legal form of real estate ownership which allows an individual or business to have exclusive use and control of the space that is actually needed, and to share with other similarly interested owners the use and responsibility for taking care of related property such as a parking lot, landscaping, and roof. At least in Pennsylvania, condos are individually deeded and taxed. Condos are regulated by The Pennsylvania Uniform Condominium Act, which provides considerable consumer protection, especially by requiring that a buyer must have at least 15 days to review a detailed and informative Public Offering Statement prior to purchase. While residential condos have been popular for many years, office and business condos are relatively new to Pennsylvania. Q: Why would someone buy a business or office condo instead of buying a separate property?
A: Condo ownership allows a buyer to buy only what is needed, and to benefit from an economy of scale. A condo buyer has many of the conveniences of leasing since a management company takes care of snow removal, lawn care, trash removal, exterior repairs and similar chores. Often, a condo buyer has an opportunity to see the space and evaluate it, customize it, and take possession of it within a very short delivery schedule. Most experts agree that buying a condo is less risky and more convenient than the alternative of developing one's own new building. Assuming everything goes right, here's what it would cost to build your own 4,000 sq foot office building. See why it would take 18-24 months to complete the job. Q: Who are the typical buyers of a business or office condo?
A: Nationally, it is typical that buyers are individuals who own their own business and are concerned about controlling their workplace environment, decreasing their after-tax occupancy costs, and creating a retirement nest egg residual. These entrepreneurs can include accountants, advertising agencies, attorneys, business consultants, computer consultants, dentists, distributors, doctors, engineers, financial planners, franchisees, insurance agents, mortgage brokers, real estate brokers, service companies, title companies and other privately owned small businesses. Q: Are there tax advantages of business or office condo ownership?
A: Condo ownership has the same tax advantages of any commercial real estate ownership, and more. Depreciation, interest, and operating expenses are allowable income tax deductions. Also, typically condos are assessed as improvements and not land, which permits greater depreciation for tax purposes than other real estate. The tax advantages of condo ownership make the after-tax cost of owning a condo less expensive than renting. An experienced CPA can explain this to you. Q: How does owning a condo compare to leasing?
A: Unlike leasing, where at the end of the lease term a tenant has nothing of economic value and can be forced by a landlord to relocate, a condo owner has exclusive control of a space and has an economic residual which can become a substantial retirement nest egg. Q: What are the basic financial benefits of owning a business or office condo?
A: Condo ownership offers several financial benefits including: probable appreciation in property value as a hedge against inflation; tax benefits for both the business and the principal investor which a competent CPA can explain; the opportunity to build equity from mortgage payments; and reduced building operational expenses due to economies of scale. Q: I want control over my property. Can I get that with a condo?
A: Absolutely you can. A condo is governed by a localized owners association, of which every owner is a vested member according to their percentage of ownership. The owners association operates within a set of covenants, conditions and restrictions (CC&Rs) that owners have an opportunity to review prior to purchase. The CC&Rs allow you to maintain control so that the value of your property and atmosphere of your workplace cannot be degraded by an incompatible or inconsiderate neighbor. Q: May I have a "custom" central entrance instead of the multiple front doors, which are the standard design for the convenience of smaller users?
A: We make special provisions for large users of 5,000 SF or more to have a special custom entrance, which are most economical if we know before we begin our framing. Q: Who does the construction now and takes care of future repairs?
A: The "shell" of the condo, as defined in your purchase documents, is provided by the developer's contractor and is warranted for two years. A building replacement escrow is built into the annual operating expenses. The goal is that, over the life of your ownership, you will never have to take care of, or have a significant expense for, any external building repair. As far as your interior construction, that is totally at your discretion. You may use any contractor you want, including the developer's contractor, whose familiarity with the building could result in a superior product and price. Q: What kind of financing is available?
A: Lender's love condos. Getting a mortgage for a condo is easier and with better terms than getting a mortgage for other commercial property, and is almost as easy as financing your home. Lenders will loan at 90% of value with fixed rates for as long as 30 years! The SBA 504 Program is a terrific opportunity to lock in the lowest possible rates over a long term. Q: Why do lenders like condos so much?
A: Lenders get concerned when business owners acquire more real estate than they need, with a risky and speculative plan of leasing it to others. When a borrower only buys as much real estate as the cash flow from operating the buyer's business can support, it makes a lending decision easier. Lenders also appreciate that the due diligence issues of a condo have been completed in advance, that approvals are in place, and that appraisals are easy and have usually already occurred for identical property. Q: What about things like common areas, load factors, and noise through party walls?
A: Because our condos have exterior entrances and no utility rooms, we have no common areas within the building for which you would pay a load factor, as you do in many office buildings. The "Quiet Walls" which separate our condos have offsetting studs, isolated mechanical boxes, and two layers of special sound attenuating insulation. Q: What makes a good business or office condo location?
A: Visibility lets people know where you are. Accessibility allows a convenient commute for employees and easy directions for clients. Proximity to a growth area provides a good base to recruit employees and clients, and increases the likely rate of value appreciation over 10 to 20 years. An affluent area offers a secure feeling for employees and places your business close to discretionary income of wealthy clients. Q: May I sell or lease my condo to someone else?
A: Sure! As owner of your condo, you may sell it or lease it. The condo regulations do provide some restrictions as to the size and location of your real estate marketing sign; and the buyer or tenant must be a permitted use. Q: If I want to set up an appointment to see a model condo and ask some more detailed questions, how much time should I budget, and what times are available?
A: Different people have a different amount of questions, but typically 45 to 60 minutes is enough time. With advance notice, an on-site appointment can be made at virtually any time that is convenient for you. Q: Do I need to be represented by a real estate broker, accountant or attorney?
A: The primary role of a real estate broker is to help you to locate a property, so if a broker has helped you to find our condo, make sure the broker attends the first meeting with us, in which event a commission will be paid. If you normally rely on an accountant for advice on your important financial decisions, you should have your accountant review the financial issues with you. An attorney is typically involved in the closing of commercial real estate, and a condo is no exception. It is advisable to ask your attorney to review the Public Offering Statement and sales agreement as you make your purchase decision. Because of a strong potential for a conflict of interests, you should not rely on the developer, or the developer's broker, accountant or attorney, to represent your interests. Is there a question you have that we haven't anticipated?
Please email it to us here. We will respond as soon as possible!
Q: What is an office or business condominium?
A: A condominium or "condo" is a legal form of real estate ownership which allows an individual or business to have exclusive use and control of the space that is actually needed, and to share with other similarly interested owners the use and responsibility for taking care of related property such as a parking lot, landscaping, and roof. At least in Pennsylvania, condos are individually deeded and taxed. Condos are regulated by The Pennsylvania Uniform Condominium Act, which provides considerable consumer protection, especially by requiring that a buyer must have at least 15 days to review a detailed and informative Public Offering Statement prior to purchase. While residential condos have been popular for many years, office and business condos are relatively new to Pennsylvania. Q: Why would someone buy a business or office condo instead of buying a separate property?
A: Condo ownership allows a buyer to buy only what is needed, and to benefit from an economy of scale. A condo buyer has many of the conveniences of leasing since a management company takes care of snow removal, lawn care, trash removal, exterior repairs and similar chores. Often, a condo buyer has an opportunity to see the space and evaluate it, customize it, and take possession of it within a very short delivery schedule. Most experts agree that buying a condo is less risky and more convenient than the alternative of developing one's own new building. Assuming everything goes right, here's what it would cost to build your own 4,000 sq foot office building. See why it would take 18-24 months to complete the job. Q: Who are the typical buyers of a business or office condo?
A: Nationally, it is typical that buyers are individuals who own their own business and are concerned about controlling their workplace environment, decreasing their after-tax occupancy costs, and creating a retirement nest egg residual. These entrepreneurs can include accountants, advertising agencies, attorneys, business consultants, computer consultants, dentists, distributors, doctors, engineers, financial planners, franchisees, insurance agents, mortgage brokers, real estate brokers, service companies, title companies and other privately owned small businesses. Q: Are there tax advantages of business or office condo ownership?
A: Condo ownership has the same tax advantages of any commercial real estate ownership, and more. Depreciation, interest, and operating expenses are allowable income tax deductions. Also, typically condos are assessed as improvements and not land, which permits greater depreciation for tax purposes than other real estate. The tax advantages of condo ownership make the after-tax cost of owning a condo less expensive than renting. An experienced CPA can explain this to you. Q: How does owning a condo compare to leasing?
A: Unlike leasing, where at the end of the lease term a tenant has nothing of economic value and can be forced by a landlord to relocate, a condo owner has exclusive control of a space and has an economic residual which can become a substantial retirement nest egg. Q: What are the basic financial benefits of owning a business or office condo?
A: Condo ownership offers several financial benefits including: probable appreciation in property value as a hedge against inflation; tax benefits for both the business and the principal investor which a competent CPA can explain; the opportunity to build equity from mortgage payments; and reduced building operational expenses due to economies of scale. Q: I want control over my property. Can I get that with a condo?
A: Absolutely you can. A condo is governed by a localized owners association, of which every owner is a vested member according to their percentage of ownership. The owners association operates within a set of covenants, conditions and restrictions (CC&Rs) that owners have an opportunity to review prior to purchase. The CC&Rs allow you to maintain control so that the value of your property and atmosphere of your workplace cannot be degraded by an incompatible or inconsiderate neighbor. Q: May I have a "custom" central entrance instead of the multiple front doors, which are the standard design for the convenience of smaller users?
A: We make special provisions for large users of 5,000 SF or more to have a special custom entrance, which are most economical if we know before we begin our framing. Q: Who does the construction now and takes care of future repairs?
A: The "shell" of the condo, as defined in your purchase documents, is provided by the developer's contractor and is warranted for two years. A building replacement escrow is built into the annual operating expenses. The goal is that, over the life of your ownership, you will never have to take care of, or have a significant expense for, any external building repair. As far as your interior construction, that is totally at your discretion. You may use any contractor you want, including the developer's contractor, whose familiarity with the building could result in a superior product and price. Q: What kind of financing is available?
A: Lender's love condos. Getting a mortgage for a condo is easier and with better terms than getting a mortgage for other commercial property, and is almost as easy as financing your home. Lenders will loan at 90% of value with fixed rates for as long as 30 years! The SBA 504 Program is a terrific opportunity to lock in the lowest possible rates over a long term. Q: Why do lenders like condos so much?
A: Lenders get concerned when business owners acquire more real estate than they need, with a risky and speculative plan of leasing it to others. When a borrower only buys as much real estate as the cash flow from operating the buyer's business can support, it makes a lending decision easier. Lenders also appreciate that the due diligence issues of a condo have been completed in advance, that approvals are in place, and that appraisals are easy and have usually already occurred for identical property. Q: What about things like common areas, load factors, and noise through party walls?
A: Because our condos have exterior entrances and no utility rooms, we have no common areas within the building for which you would pay a load factor, as you do in many office buildings. The "Quiet Walls" which separate our condos have offsetting studs, isolated mechanical boxes, and two layers of special sound attenuating insulation. Q: What makes a good business or office condo location?
A: Visibility lets people know where you are. Accessibility allows a convenient commute for employees and easy directions for clients. Proximity to a growth area provides a good base to recruit employees and clients, and increases the likely rate of value appreciation over 10 to 20 years. An affluent area offers a secure feeling for employees and places your business close to discretionary income of wealthy clients. Q: May I sell or lease my condo to someone else?
A: Sure! As owner of your condo, you may sell it or lease it. The condo regulations do provide some restrictions as to the size and location of your real estate marketing sign; and the buyer or tenant must be a permitted use. Q: If I want to set up an appointment to see a model condo and ask some more detailed questions, how much time should I budget, and what times are available?
A: Different people have a different amount of questions, but typically 45 to 60 minutes is enough time. With advance notice, an on-site appointment can be made at virtually any time that is convenient for you. Q: Do I need to be represented by a real estate broker, accountant or attorney?
A: The primary role of a real estate broker is to help you to locate a property, so if a broker has helped you to find our condo, make sure the broker attends the first meeting with us, in which event a commission will be paid. If you normally rely on an accountant for advice on your important financial decisions, you should have your accountant review the financial issues with you. An attorney is typically involved in the closing of commercial real estate, and a condo is no exception. It is advisable to ask your attorney to review the Public Offering Statement and sales agreement as you make your purchase decision. Because of a strong potential for a conflict of interests, you should not rely on the developer, or the developer's broker, accountant or attorney, to represent your interests. Is there a question you have that we haven't anticipated?
Please email it to us here. We will respond as soon as possible!
WHY LEASE WHEN YOU CAN OWN?