Buying a commercial property from which to operate is an exciting time in any business owner’s career. Investing in commercial property instils trust in a business organisation’s client base, it provides assets to borrow against, it enables them to engage in branding as they see fit and it may also enable them to expand their workforce.
Whilst there are a number of advantages to buying a commercial property, the scale of the financial outlay involved means there are many factors to consider before taking the plunge; moreover, without a clear understanding of what these are, the waters can prove very deep.
To give you an idea of what’s involved; here are some of the advantages and disadvantages to investing in a commercial property to operate from.
Advantages
- Your business organisation benefits from capital gains if the commercial property you buy increases in value
- You can re-mortgage your commercial property to invest in new equipment, infrastructure, etc.
- Your mortgage repayments are likely to be similar to rental payments but you’ll eventually own the property
- Interest payments on commercial mortgages can be claimed back on tax refunds
- Your business organisation is no longer subject to rental increases or landlord demands
Disadvantages
- To be approved for a commercial mortgage you’ll need to come up with a deposit of 20-30 percent
- Your business organisation could suffer a loss if the property decreases in value
- You’re now responsible for the maintenance of your business premises and you must also pay insurance, rates, etc.
- Your business organisation won’t be as flexible regarding relocations or downsizing
- Buying a commercial property for a business premises ties up cash flow that could be used to improve business infrastructure, replace equipment, etc.
These are important factors to take note of, research and consider; moreover, there’s no one-size-fits-all conclusion you should come to as your business organisation naturally differs from those of your business peers and competitors.
However, if you do decide that buying a commercial property is in your business’s best, here are some of the factors you’ll need to consider.
- The need to work with experts
Depending on the scale of your business organisation, there’s a good chance that you already work with some of the experts – accountant, commercial broker, lawyer, mortgage broker, etc. – you need to research, source and buy a commercial property.
- There’s more to location than meets the eye or ear
Importance must be placed upon location, but it’s also important to understand that locations are trendy in that they can be all the rage now and attract the attention of investors, business organisations and city planners who want to increase public transportation links, and then be forgotten about tomorrow.
Having said that, the opposite also happens, so research the location you’re considering buying into thoroughly – you’re buying not renting and you can no longer relocate like you once did.
- Your future plans
How much longer are you planning to operate from the new location and do you have plans to sell your business in the next five to ten years? If you do, perhaps buying a commercial property isn’t a wise move.
- The need to understand historical performance
Access as much information about the building, office or shop you’re considering buying and evaluate its performance over the past few years.
Savvy commercial property investors do this to see whether properties are suitable for letting, though you should also do it when buying a property to operate from as it can tell you plenty about the neighbourhood.
- The cost of the fit out
How much will branding and fitting out the property cost and will it still prove a competitive purchase once it’s ready for business?
Buying a commercial property from which to operate your business organisation from could prove to be among the wisest business decisions you ever make, but without a thorough understanding of what’s involved there’s just as much chance of it being decidedly the opposite.
As a result, if you’re to make an astute investment in a commercial property to operate from, you’ll need to understand these and other pertinent factors – time to start doing your homework.
Author: Brenda writes for a company that was established in May 2013. Fox Davidson at foxdavidson.co.uk/ is a market mortgage brokerage that specialises in providing advice to those looking to finance property in the UK.
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