Frequently Asked Questions About Office Condominiums

The value of real estate has done nothing but increase, but you're still a tenant. You tell yourself you should be building equity in property instead of writing rent checks.  But you don’t have the time to get your questions answered or the expertise and financial ability to develop your own office.  You’ve heard about office condominiums, but you have a lot of questions.

We understand that you may have questions about buying an office condominium – so we’ve compiled a list of the most frequently asked questions during a typical purchasing process.  It should answer many of the questions you may have about office condominiums and how your company can benefit from ownership.  If you have a question that isn’t addressed here, please don’t hesitate to contact us for more information.

Q. What is an office condominium?
A. Office condominiums are offices in multi-unit developments that are specifically designed for medical/dental offices, small and mid-sized businesses, and satellite offices of larger companies that want to take advantage of the benefits of office ownership, but don’t have the resources to purchase a larger building, or the time, experience, and expertise to purchase land and develop their own project.  An office condominium is similar to a residential condominium in that the buyer owns only their individual office, but not the outside of the building or common areas.  Like a residential condominium owner, office condominium owners have an undivided interest in the common areas of the development, such as the parking lots.

Q. Who are the most common buyers of office condominiums?
A. The typical buyer of an office condominium project is either a private medical or dental practice or a small to mid-sized service/sales company – such as accounting, legal, or insurance firms that have been in business for at least two years.  Most buyers have been leasing space prior to purchasing an office condominium and becoming their own landlord.

Q. What are the benefits of buying versus renting my company’s office space?
A. The benefits of buying an office condominium are numerous. As a condominium owner, a company can take control of its financial future, locking in fixed occupancy costs and avoiding escalating rental rates and lease re-negotiation.  And with today’s low interest rates, monthly mortgage payments are often less expensive than a monthly lease payment.  The owner builds equity in the project as mortgage payments reduce the loan balance.  After 10 years of leasing, you have earned no equity.  In addition to equity build-up, there is probable appreciation in real estate value.  While many investments are suffering in today's economy, real estate continually proves to be a great asset.  Many small business owners find it difficult to put aside money annually for retirement. Buying office space creates a "built-in" retirement plan.  Effectively, a part of each monthly mortgage payment pays down on the principal, and increases equity in the real estate asset.  For many businesses, a lifetime of successfully operating and building a company does not necessarily amount to a business that can be sold for an appropriate profit. As discouraging as this may be for many business owners, buying the building the company operates in will create a significant asset.  After mortgage interest tax deductions and depreciation write-offs, tax savings may be comparable or greater than rent deductions.  With ownership, you also have greater control of your business, including the freedom to operate your business as you want, or to customize your office space to meet the unique needs of your practice or business.  Owning your own office building can give you equity in a real property, offer you tax advantages, and give you better control over your practice. You can decide how much space you need, how to use it, whether to sublease space to other doctors or ancillary users, and even the best way to maintain it.

Q. What are the risks that I should be aware of?
A. Businesses that require a great deal of flexibility, in terms of adding or subtracting substantial amounts of space in response to fluctuations in their business, may not be good candidates for buying an office condominium. Otherwise, over time, ownership benefits tend to significantly outweigh the risks.

Q. What if I don’t know my future office space needs?
A. Most medical practices, and other established companies are able to reasonably estimate their office space needs for the foreseeable future, so buying an office condominium should be a realistic option for most businesses, unless the company is experiencing rapid growth or decline.  In many cases, however, owners choose to buy additional space with future growth in mind, and simply lease the unused space to other practitioners or companies.

Q. Who handles the maintenance of the property?
A. The condominium owners control the condominium association, and can handle management and maintenance of the property as they desire.  In some cases, a management company handles management of the property and maintenance of the common areas, such as the parking lots and landscaping.  Each owner has an undivided interest in the common areas, and pays their pro-rata share of these costs.

Q. What are the common costs?
A. Aside from the purchase price, common costs involved in purchasing an office condominium may include the maintenance of landscaping and parking areas, parking lot lighting, and other project maintenance expenses outside of the individual condominium units.  Typical common area maintenance fees have an annual rate of $.50 to $1.00 per square foot, depending on whether you hire a property management company, whether office cleaning or medical waste disposal is handled jointly or individually.

Q. What are the tax advantages?
A. There are many tax benefits that include the ability to deduct mortgage interest and depreciate the property, however, for the best guidance, you should consult with your tax advisor and accountant.

Q. What kind of financing is available?
A. Attractive interest rates are available for buyers of office condominiums, either through conventional lenders or Small Business Administration (SBA) loans. The SBA is a federally funded government program that has made it possible for many small and medium sized businesses to purchase their office space by providing loans that require as little as a 10% down payment for the total loan value. In addition, a business line of credit can often be put in place at the same time as the building acquisition loan, allowing the business owner to cover the 10% down payment.  The end result is equivalent to a 100% financing available to business owners, which includes purchase of the office, interior improvements, and even medical equipment.  A buyer’s lack of money for the down payment does not necessarily prevent a business owner from purchasing an office condominium.  If you do not have your own lending relationships, CitiPlex works with conventional and preferred SBA lenders, and can refer you to a reputable and reliable lender experienced in office condominium financing.

Q. I have an extremely busy schedule.  How can I manage the buying process?
A. CitiPlex’s buyer assistance program is designed with busy professionals in mind. The program offers a simplified step-by-step approach, to include introduction to financing sources, resulting in a smooth and successful transaction.

Q. What’s different about CitiPlex medical office condominium projects?
A. Our office condominium developments are located in ideal locations in suburban Houston.  They are designed to provide excellent accessibility for owners, employees, patients and clients, and typically offer generous parking lots that allow you and your clients the convenience of driving right up to the building.  Clients can park near the entrance to your office, and reserved covered parking is provided for owners at the rear of the building.  We do not put every allowable square foot of building on the site; rather, we maximize landscaping values and “green” areas to enhance the overall look of the project, for stronger street appeal, and greater visibility of individual office entries and exterior signage.  All buildings are sprinkled for fire/ life safety, with individual A/C systems.  Finally, you can purchase exactly the amount of space you need, and customize it exactly to your needs.

Q. Once I decide to own an office condo, what happens next?
A. CitiPlex Corporation will work with you or your broker or advisors every step of the way:

1. Make a commitment to own your office space
2. Visit with your designers or our architects to discuss your office needs
3. Review and approve your interior space design and cost
4. Finalize financing (independently or through CitiPlex referred financing sources)
5. Watch as construction on your office space progresses
6. Customize your space with finishes, paint and flooring you select
7. Move in and enjoy the control and financial benefits of ownership

Have Other Questions?

Click here for a new Special Report: The Pros and Cons of Buying or Leasing Office Space.

Click here for more information on the benefits of office ownership.

Click here for additional information on the features and benefits of CitiPlex office condominium projects.

Click here to download the Sugarland Professional Center brochure.

Click here to download an Own versus Lease Analysis.