Mirror Match

One of the hardest things in business is making business decisions that are clearly against your principles and what you believe in, all for the sake of profits. But as we are seeing with each passing day, the focus is on survival and the bottom line, much less about who or what stands in the way. Getting into the state of mind that you’re the exact replica – except opposite – is tough, mentally anguishing and raises the feeling of uncertainty even with all the black and while justifying the decision.

The response to this is generally (depending on who you’re talking to): “Grow a pair of balls and quit your bitching!”

I’ve spent a large part of my professional career preaching that the CAPEX of any business needs to be limited, that liquidity (cash balance) is what matters the most and that the cleanest way to run a profitable business is to move as much of the fixed/variable costs to the operational expenses that are quickly written off and profit / growth is easy to judge. Not to mention the flexibility that brings to a business, lower risk, etc.

But you can go to college if you want to learn about business.

I’m here to bitch.

I’m here to bitch about the inconveniences that growing a business – aside from the only one I know how to run well – is causing me to re-evaluate how I view the world of leasing, etc. Namely, my tiny growing Central Florida presence now has to get a bigger office. And office space is expensive.

How expensive is it Vlad?

It’s more expensive than owning the actual property. Yes, the inconvenient to get to, park and otherwise physically alter office space with a Mexican running around picking up paperclips off the floor for $3.50 an hour is apparently worth $30/sq/ft + CAM. Except it’s not REALLY worth that much because half the damn building is empty, the businesses that used to be in them have no chance in hell of returning anytime soon.. but like a crooked mob they are all keeping their prices artificially fixed at a level so high that they can’t get any new business in there and lowering the rate would trigger a massive renegotiating effort by current tenants in a marketplace where very few people are starting businesses that require class A office space. Yep, we’re doomed. 

Witchcraft & Astrology Decision Making

So now I’m in a position where I have to make a long term investment in a commercial property in Orlando. Simple enough, call the bank and ask for cash.

Buying the place… not so easy. Why? Most of the deciding factors are complete vapor, made on no substantial data.

How big do of an office space do you think you’ll have 5 years from now? (how many employees will you have employed 5 years from now?)

What do you think the eventual resale value of the property will be, ten to thirty years from now?

Commercial property in that part of town will always keep on going up!

This is where things get completely idiotic. First, I am as sure of the property value of the building and land in Florida in year 2019 as I am sure that Orlando will be under Atlantic Ocean.

Second, this is a total emotional cluster@#%. You are driven to overbuy because it’s easy to pay a little more but virtually impossible to expand the building.

The Bottom Line

At $30/sq ft ($25/sq ft/month) for class A office space lease, it is far more expensive to lease than to buy a property at $250/sq ft. This means, barring an the uneventful sinking of Florida into either the gulf or ocean, that buying a property is like making a savings deposit of your rent check every month and the ability to cash it in at any point. When you calculate the inflation and contractual annual increases in rent that are guaranteed on a commercial lease, it makes even more sense to buy.

Looking at the new tax structure proposals is making this an even easier decision. If we pull dividends out of the company, or take huge salaries, we’re taking a 39% hit. However, if we’re holding something for more than 3 years (not 100% sure on how many years) then we’re only subject to long term capital gains of 22% or so.

So with all the math, smoke and mirrors.. how big of a place do I want and where do I want it? This is where it gets REALLY hilarious. Random people sit around the table and try to predict the future of where people will live, how they will work and what they’ll be willing to pay for. Yes ladies and gentleman, I am no longer the king of SPAM killers, I’m Walt F’n Disney building Epcot.

At this rate, I’m getting a $50,000 crackhouse in the middle of Paramore, Orlando so I can at least have an excuse…