Buying business premises gives you control over one of your major financial investments. As an owner-occupier, you can choose to stay in the premises forever. If need be, you can raise money through selling, taking out an additional mortgage or letting part of the premises.
Why buy?Putting down a large deposit may seem expensive, compared with the low start-up costs involved in renting.
But if you believe in the long-term future of your business, there may be good reasons to buy.
- The property is an investment for your business, which may give you a good return.
- Over the long term, property owners have generally achieved excellent returns on their investments.
- The long-term cost of buying premises is generally less than the rent you would pay.
- Some business owners purchase the premises as part of their superannuation scheme. We strongly advise that you contact us before heading down this path.
- You may gain operational flexibility by owning your premises.
- You can design the premises to suit your business. If you are building from scratch, you can specify aspects of the premises in detail.
- You may be able to extend or rebuild parts of the building as your business expands.
- You can let part of the premises to another business.
- If necessary, you can re-mortgage the premises to provide funding.
- You can arrange a ‘sale and leaseback’ deal to raise finance. You then become the tenant of the person/company you sell to.
- There could be depreciation allowances available.
Why choose not to buy?Before you go into property ownership, consider the possible disadvantages.
- Can you afford to invest so much?
- Buying premises ties up cash that could be used to grow the company.
- If you are borrowing money to buy, interest rate increases could hit you hard.
- Do you understand the commercial property market?
- By buying your premises, you make property ownership a core part of your business. You become exposed to an unpredictable market.
- If you buy at the wrong time, or in the wrong area, or the wrong type of building, you may end up losing money.
- In a recession, it may be hard to let or sell your premises without a significant loss.
- But that may be the exact time when you are forced to sell.
- Will you want to relocate, or change the size or layout of your premises?
- A good lease may allow you more flexibility to move elsewhere quickly.
- Are you prepared to handle the extra work and expense that will be involved in maintaining your premises?