Owner Occupied CRE, The Unsung Hero of Every Economic Cycle

  • March 19, 2024

As a fellow commercial real estate professional, you’ve likely seen headline upon headline about commercial real estate (CRE). From talks of CRE dying to predictions of the next boom, we’ve read it all. While AVANA wishes we had a crystal ball to know the exact future of CRE, we can share a few tips based on history and experience: Owner-occupied CRE is the unsung hero of every economic cycle.

Small business owners look to you to give them the insight they need. This is an overview of everything they need to reap the core benefits of owner-occupied CRE.

If you want to promote owner occupied CRE across your client base, feel free to repurpose the points we’ve made below.

What is owner-occupied commercial real estate?

Owner-occupied commercial real estate (OOCRE) refers to a property that is purchased and used by a business owner for its own use, as opposed to leasing or renting from a third party. The business not only owns the property but also occupies it for the primary purpose of operating from it. OOCRE could include various types of commercial real estate such as retail spaces, industrial facilities, or warehouses.

What are the benefits of owner-occupied commercial real estate? 

There are several benefits made available to businesses who buy their own CRE. Here’s just a few:

Stability. Property ownership ensures that a business has a secure and stable location. Business owners are not at the mercy of their landlord, or a change in landlords.
There are also economic considerations to OOCRE. With a fixed-rate mortgage, business owners can lock in a stable monthly mortgage payment, providing predictability in their occupancy costs. This, compared to increasing rental costs, is highly advantageous in the long term.

Financial Impact. There are three primary ways owner occupied commercial real estate has a positive financial impact.

1. Equity Accumulation: In place of paying rent to someone else – someone who is likely using the rent to cover their own mortgage – a business owner can build equity in their own property.

2. Asset Appreciation: Over time most commercial real estate will appreciate due to economic conditions, improvements made to the asset, and/or market trends. Any of these circumstances can lead to the appreciation of the asset.

3. Tax Deductions: Businesses that own their own CRE may be eligible for certain tax deductions such as writing off interest paid on a mortgage, property taxes, and other eligible expenses. It goes without saying, consulting a tax professional is highly recommended to ensure all opportunities are seized and done so appropriately.


Secondary Financial Impact – In addition to the core reasons above, there are three secondary or less common ways that owner-occupied commercial real estate can have a positive financial impact.

1. Rental Income: While not always applicable, a business owner might have extra space available. In such cases, the business may lease the excess space while concurrently generating rental income.

2. Collateral: Business owners may be able to offer their equity in the property as collateral for a loan, providing leverage for future financing needs. The added collateral support could help secure financing that might not be available otherwise.

3. Retirement: Yes, you read that right. When business owners opt to retire, or any time in which their business is sold, they can opt to (a) sell the property and cash in on the accumulated equity or (b) lease it to the new business owner while becoming a landlord that collects a monthly payment.


When is the right time for businesses to consider buying their own building?

You’ve heard it before, that “the best time to plant a tree was 30 years ago. The next best time is now.” The same principle, source unknown, applies to your owner-occupied CRE. The best time is today.

Some business owners may argue that rates are too high right now. Others will say no one is lending. And still others may tell you that there’s no inventory available to buy. Despite challenging market conditions, AVANA is seeing countless business owners buying a “home” for their company. Best of all, we’re helping these deals close.

How can AVANA help?

AVANA Capital offers business owners reliable owner-occupied CRE financing. We believe in “Capital for a Better Tomorrow,” which means we seek to empower owners with the resources they need to give their business roots.

We have experience providing the capital needed for owner-occupied commercial real estate transactions. What is more, we own and operate a CUSO (a credit union service organization), which allows us to fund more of your deals by way of our national credit union network; meaning faster yesses, and access to conventional and SBA 504 loans with ‘no prepayment penalty’ options.

Brokers who help borrowers access capital for OOCRE projects quickly and efficiently are positioned to win in a recovering CRE market. If you want to promote owner occupied CRE across your client base, feel free to share this content.

Let’s close some loans together!