The Pros and Cons Of Buying A Commercial Property
If you require premises to run your business from then there are many things that you will need to consider such as ensuring the commercial property is fit for purpose, will it be adequate to meet any business expansion requirements in the future and is it well located. Another consideration is whether you should buy or lease the premises.
As with most things in life, there are pros and cons of both options so let us have a look at some of these in a little detail.
Advantages of buying a commercial property
- Probably the biggest attraction of purchasing a commercial property is that you own a substantial asset that will, hopefully, increase in value over the years. Should their come a time that you decide to sell the business and retire it could provide a significant capital sum that could be used towards supporting you financially in retirement. Alternatively, you may decide to sell the business but retain ownership of the premises and lease it to the new owner to provide you with an income.
- If you lease a property you tend to feel that the monthly rental payments that you would need to make are going into a “bottomless pit”. However, if you purchase the premises, quite possibly with the assistance of a commercial mortgage, you will at least feel that the monthly repayments on the commercial loan are reducing your indebtedness and in a few years time the commercial mortgage will be cleared and you will own the premises outright.
- You may be able to sub-let part of the premises if you have the capacity to do so to generate further income.
- You will not be subject to rental increases. In fact, if you felt it was best to go for a fixed rate commercial mortgage, your repayments would remain the same for the term of the fixed rate.
- You can offset the interest element of the commercial mortgage repayments against tax.
Disadvantages of purchasing a commercial property
- You are likely to have to find a significant deposit towards the purchase price as a commercial mortgage lender will not provide 100% finance.
- You will need to maintain the commercial property.
- If you outgrew the premises or needed to relocate it is likely to have been easier to move from rented premises.
We hope that the above has given you “food for thought”.
– Why not contact us for a no-obligation discussion about the choice of commercial mortgages available to you.