The Best Ways To Acquire the Space for Your New Business
So, you’ve figured out what type of space you need for your sports facility, and you’ve scouted some potential sites. By now, you should be getting an idea of what your space is going to cost.
Now it’s time to figure out how you’re going to pay for it.
As you start your sports facility, your site will be just one expense of many — but it’s definitely the biggest and most important one.
When it comes to property, you have two options: buy or rent.
Option 1: BUY
If you DO have the cash to buy your space, it’s definitely the best option. When you buy, you’ll have the security of being able to sell the space later, and you have full flexibility to do what you want with it. Plus, you won’t risk unexpected rent hikes or getting kicked out by your landlord.
Most of us don’t have enough cash lying around to purchase a new building for our sports facility outright. That means we have to borrow the money, either from private investors or a bank, and commit to paying it back over time.
- Partnerships and personal loans. If you know anyone who has money to invest and is interested in your facility’s services, consider pitching a partnership that would pool your financial power. Before you approach a potential partner, check out this detailed post on sports facility partnerships. Once you come to an agreement, you’ll need corporate lawyer to make everything official — preferably one who has experience with businesses like yours.
- Bank loans. When I purchased the space for PPC Communications, the company that develops eSoft Planner sports facility scheduling software, I thought I knew a few things about property financing because I had purchased my own house. However, residential real estate and commercial real estate loans are NOT the same. For example, you may get a great rate for your business property for a number of months, but then have to pay the rest of the original loan amount at the end of the loan term (this is called a balloon payment mortgage). The best way to figure out your commercial financing options is to talk to local bankers. Don’t hesitate to compare several banks for the best rate and to get the full idea of what’s available.
Regardless of how you finance your building, I’d suggest that you look for existing or previous spaces for sale instead of building new. A simple Google search for “sports businesses for sale” along with your city name will usually yield helpful results. I also check Merger Network regularly.
When you buy an existing space, you save months of construction time and related headaches. You may also be able to snap up their used equipment for much less than the going retail price, with additional savings on shipping and installation fees. However, buying a pre-existing site can also come with problems; for one, you may have to deal with a less-than-stellar reputation left by the previous owners. If you can, you should find out why the facility closed or is closing … make sure the location itself didn’t play a role.
Option 2: RENT
If you can’t get the right combination of partnerships and financing to afford purchasing your sports facility site, renting is not out of the question. You’ll just have to be even more careful with your cash flow.
If you’re going to rent, look for partnerships with property owners. Real estate property investors would often LOVE to fill their space with a reliable client and are usually willing to partner with sports facility owners by turfing the space or tailoring it to suit their needs in other ways — I’ve spoken with several eSoft Planner clients who have successfully arranged this type of agreement.
Regardless of where you rent, be careful with the terms and conditions listed in the rental agreement. You need to know who is going to be responsible for maintenance, repairs and upkeep. I’d also suggest checking past utility records for the space if you’ll be in charge of paying those bills, and even see if you can find referrals for your property owner.
As I mentioned in my last post on choosing a sports facility location, this is a big decision. It’s worth the careful research.