One of Sam Beckford’s favorite success stories is a client who didn’t buy property until she was in her late 50s.
The client owned a small dance studio that operated out of a building she rented. Beckford advised her to buy commercial property and stop paying rent. So, at around age 57-58, when most people are thinking about retiring, she paid $2.4 million for a 10,000-square foot building.
After purchasing, she made a couple small improvements—nothing major. Two years later, the building appraised out at more than $4 million.
“In two years, that building made more money than she had made in the previous 30 years she had run her business,” says Beckford.
Now, this business owner has a highly valuable business to sell some day, creating a nice retirement nest egg.
Beckford’s coaching company, Successful Property Strategies, was initially created to coach dance and music studio owners about business management and owning commercial real estate (founded in 2003, it was originally called Successful Studio Strategies).
Now, Beckford coaches owners of a variety of small businesses on how to strategically buy property based on his own experience.
Beckford and his wife are dance studio owners themselves, and when they started their studio in 1999, there was an opportunity to buy a condo space, and that’s how they got their foot in the real estate door.
“We didn’t even own a house,” says Beckford. “Four years later we bought our second property—a stand-alone building. Then we sold the condo and bought another building with tenants. Then we bought land and built a 13,000-square foot plaza.”
He now tells any business owner who is fearful of the process, “If a dance studio owner can own real estate, anyone can do this.”
However, many small-business owners, including salon owners, still feel trepidation when considering commercial real estate—especially if they’ve always been renters. The idea of taking on a big mortgage and even just finding a building to buy can be intimidating.
At Successful Property Strategies, Beckford advises everyone from doctors, lawyers and dentists to studio and shop owners, and finds many of his clients don’t even consider owning their own building to be a possibility.
“They say nothing’s for sale, or it’s too expensive,” he says. “They’re self defeating before they even start looking—plus they are just fearful.” Beckford warns that everyone and every thing from your own family to the economy will put fear into you when you contemplate buying commercial property.
Sam Beckford, founder of Successful Property Strategies.
“But the fear is simply a lack of knowledge,” he says.
“You don’t have to do everything you find out, but find out everything you can do,” he says. “There could be a million-dollar opportunity you’re driving by every day. You could be the person to own that building and create wealth beyond your business.”
When Beckford and his wife bought their properties, he says there were at least 1,000 other businesses the seller would have rather dealt with—but they never showed up.
“In my workshops, I go through why it’s so great to own real estate. Then I ask people why everyone doesn’t do this. Then we write down all the objections: Will it affect my credit poorly? What if the area changes? Can I make payments?”
At the end of the workshop, Beckford goes through every objection and invalidates it.
Perhaps the biggest fear is losing money on a property when it’s time to sell.
To that, Beckford says, “If you own a property for 20 years and that property is paid off, it’s not going to be worth $0. It will have an established value. But if you pay rent, you will have $0. So what’s riskier?”
But let’s say he’s wrong and the property is worth $0.
“If you’re still running your business, your mortgage is paid off and you don’t have to pay it anymore. Think of it in terms of car payments—when it’s paid off, you still have a car.”
He adds, “If you’re a terrible investor, commercial property is great, because the investment can’t go down. Even if your property went down in value, you still have money in your pocket and extra money you aren’t paying in rent. And chances are, rent would increase every year. A mortgage is fixed.”
Beckford lists another reason people are afraid to invest in commercial property is a lack of mentors. Everyone knows people who’ve bought a home, but finding someone who owns a piece of commercial real estate is more rare.
He warns against using a realtor as a mentor though, as realtors are motivated by commission. “A mentor who has no vested interest wants you to get what’s best for you,” he says (note: as a consultant, Beckford does not participate in deals—he only consults/advices).
Finally, he says many creative people find buying property intimidating because it seems so serious, and “not for an artistic type like me.”
Beckford tells these people, “An entrepreneur is just an artist who is not afraid of commerce.”
He also says business can be an art if approached correctly.
“Creative people have a much bigger advantage when it comes to buying,” he says. “They can see a blank space and figure out what to do with it. Other people can’t do that.”
Ultimately, Beckford advises his clients to be strategic and buy where the opportunity is.
“When you own the building, you have a lot more control,” he says. “The more control you have, the more opportunity you have. Go in with a fresh eye and creativity and you’ll have a winner. And you’ll feel much better about going to work in a building that you own.”
Know Your Options
Once an owner has found the right property, there are options for purchasing. Beckford recommends visiting the Small Business Administration website (sba.gov) as they will finance up to 90 percent of your property purchase.
However, you may also want to consult with an expert as there are some tricks and tips to working with the SBA they can share.
“Owner financing in commercial property is also very common,” says Beckford. “Let’s say you see something for sale. The property owner may say, ‘tell me how much you can come up with for a down payment and you can pay the mortgage directly to me.’
"An entrepreneur is just an artist who is not afraid of commerce.--Sam Beckford
So the owner holds the mortgage rather than the bank. Often there’s no credit check involved when a property is owner financed.
“If you are creative, there are ways to work with owners to structure deals where you don’t need a ton of money or any money down,” he adds.
“Most deals I do with people are a combination of strategies—it’s all about creativity. I’ve had some deals that are a little complicated, but to complicate your life for three or four months is worth $100,000 or $1 million or whatever it saves you.”
Once the property has been purchased, you start building equity every year. And if you’ve bought in a good area, appreciation will also bring up the property value. Beckford says spending just a little money on sprucing up your curb appeal is another way to increase value.
Planning for Retirement
When it’s time to sell your business, Beckford says the price is typically based on earnings—usually three times per year of earnings.
“But here’s the scary thing,” he says, “Inc. magazine recently stated that 70 percent of small businesses listed for sale can’t be sold. They either don’t have value without the owner or they are just a job. And people don’t want to buy a job.”
Most businesses are not cash sales. There is usually a down payment and combination of monthly payments until it’s paid off.
“Sometimes the new owner rides shot gun with the old owner the first few months before they leave. Then the business takes a dip and the person who has bought the business can’t pay you because clients are leaving. They break the deal and give you the business back damaged.”
Scenarios like this aren’t uncommon, which is why Beckford stresses the importance of owning property.
“Even if you can’t sell your business, you can sell a building,” he says. “But it’s easier to sell a business if you own the building. If you were to list your business with a broker, the first thing he would ask is, ‘what is your lease like?’ If you say you have a year left, the broker would tell you to renegotiate. The new owner of your business doesn’t want to risk rent going up. But if you own the building, you control the lease. You can tell your potential buyer there is a 10-year lease with an awesome landlord (you).”
On the flip side, if you want to sell your building to an investor, he will ask, “What’s the cash flow? How long is the lease on the business in the building?”
Beckford says, “There’s a high failure rate for a brand-new business. But if I go to an investor and say, ‘I have a hair salon I’ve run for 25 years and just sold to a new owner with a 10-year lease,’ that’s a stream of income. Having your business in the building makes it more valuable.”
Another option for retirement is selling your building, but leasing the business back to yourself.
“This is a good option for when you need money, but you want to run your business,” says Beckford. “You can sell to an investor and lease back at a pre-negotiated rate with a long-term lease written for yourself.”
In his two-day workshop, Beckford teaches attendees to know their tools and options as well as showing them 100 different strategies for buying commercial real estate.
His passion for property stems from someone very close to Beckford—his dad.
In 1977, against all advice, his father bought a building in Toronto to run his dental lab business from. When he sold his business two years ago, he only got one third of what he thought he would. Then, at the end of last year, he received an offer to buy his building for $5.1 million. He turned it down because he thinks it’s worth more, and now Beckford is working with him to get an even better deal.
“At the end of his career, it doesn’t matter what mistakes he has made in business because he’s going to get the pay day,” says Beckford.
To learn more about Beckford’s seminar in Vancouver, visit sambeckford.com.
Originally posted on Salon Today.