The True Cost of Owning a Commercial Building

Before ownership starts, a purchase creates costs that rent never did. List them separately from the down payment, because the down payment builds equity and these mostly do not.

• Reports and inspections: environmental, property condition, survey and appraisal.
• Legal and title: your attorney, title work and recording.
• Loan costs: lender fees, and SBA program fees if you use one of those loans.
• Transfer taxes, where your state, county or city charges them.
• Moving, build-out, furniture and technology, plus any overlap with your current lease.

Ask your attorney and lender for written closing estimates early. The cash left after closing is what will pay for the first surprise in the building, so a purchase that drains your reserves can be riskier than the numbers suggest.

If you are on a net lease today, you may already pay a share of some of these. As an owner you pay all of them, including any share that a landlord absorbed, and you now manage the vendors too.

• Property taxes. These change with reassessments and local tax rates. In Cook County, for example, a property is reassessed once every three years, on a schedule set by township, and owners have a limited window to appeal.
• Insurance. Lenders generally require it. For SBA loans above $50,000, SOP 50 10 8.1 (effective October 1, 2026, subject to change) requires hazard insurance on pledged assets and flood insurance where the federal flood program requires it.
• Utilities and building services: power, water, gas, trash, snow, landscaping, cleaning, security and elevator or fire system contracts.
• Routine maintenance and repairs, including the small calls that a landlord's team used to take.
• Any shared-building charges, if you buy a condominium unit in place of a whole building.

A Thompson Coburn checklist for acquisitions tells buyers to request the last three years of real estate tax bills, including special assessments and protests, plus two years of utility bills and every service contract. Those records give you a factual starting point for this part of your budget.

Roofs, heating and cooling systems, parking lots, windows and elevators wear out on their own schedule. A landlord's rent was quietly paying for those replacements. As the owner, you write the check, often in a single year.

The way to avoid being surprised is a reserve. Use the property condition report to list each major system, its age and remaining life, and the estimated cost to replace it. Then divide each cost by the years remaining to reach an annual set-aside.

A building with cheap monthly costs and an old roof is not cheap. It has deferred the expense onto the next owner, and at closing that is you.

Tax treatment is another reason to separate these items from repairs. IRS Publication 334 (2025) says you generally do not depreciate repairs or maintenance that do not improve your property. Improvements, such as betterments, restorations or adapting property to a new use, are treated differently. Ask your CPA to set up your categories early.

Ownership also brings obligations that a lease may have left with someone else, or split between the parties.

• Accessibility. The Department of Justice's ADA primer says businesses that serve the public must remove barriers in existing facilities when it is readily achievable, that the obligation is continuing, and that new construction and alterations follow specific standards.
• Environmental. EPA explains that under the federal Superfund law, liability for contamination may be assigned based solely on property ownership, and that buyers can protect themselves by meeting specific criteria, including all appropriate inquiries before purchase.
• Building and fire codes, inspections, permits and local licensing, which vary by location.

Have your attorney explain which of these apply to the building you are considering, and price the work before you commit.

Two costs never show up on a building's statement. The first is management time. Someone in your company will now hire vendors, approve repairs, handle tax appeals, deal with insurance and answer calls when the heat stops. If you lease part of the building to others, add leasing, tenant relations and collections. You can hire a property manager, but then the cost simply moves to a different line.

The second is the money you tied up. Cash used for the down payment and closing is no longer available for hiring, equipment or growth. That cost depends on what your business could otherwise earn with the same dollars. Your finance team can estimate it, and it belongs in any decision.

Owning does bring offsets. IRS Publication 334 covers deductions for business interest (with limits for some taxpayers) and real estate taxes on business property. IRS Publication 946 (2025) lists nonresidential real property with a 39-year recovery period and states that land cannot be depreciated. Rules can change and vary by entity, so your CPA should run these numbers for your company.

1. Get three years of actual operating statements, tax bills, utility bills and service contracts from the seller.
2. Adjust them for your use: your hours, your headcount, your equipment and any space you would add.
3. Ask your broker or attorney whether a sale could change the property's tax assessment, and ask your CPA to include that risk.
4. Get an insurance quote on the actual building, with your lender's requirements in hand.
5. Turn the property condition report into a capital reserve schedule.
6. Add a line for management time, whether staff or an outside manager.
7. Add the loan payment and compare the total with your expected rent for equivalent space.

Tenant Advisory Group helps buyers compare ownership with leasing on the same footing, so that a building is judged on its full cost, not only its mortgage payment. We are a broker, not a lender or tax advisor, so your CPA and lender should confirm the final figures.