subject: To Buy Or To Rent A Commercial Property For Your Business? [print this page] To Buy Or To Rent A Commercial Property For Your Business?
It's not an easy decision to make as to whether you lease or purchase your business premises. Your company buildings such as offices, factories and warehouses may be your most expensive business venture, but they can also turn up to be the largest business investment too. It is therefore advisable to take some time to think over this huge decision.If you need to move quickly or require flexibility in your premises to contract and expand then renting may be your best option. Businesses that see fluctuation in demand may require the ability to grow and shrink in size and so renting would be a good option. Buying a commercial property may well be suited to a business that is looking for a level of stability and to benefit from an increase in value of the asset.Leasing Business Property: Leasing property for your business is often the best option for new and expanding businesses as you are unlikely to have the funds to afford a mortgage, and also a lender may not view your business as a good risk if you don't have the historical accounts to prove your business's success. As a new business you will be more likely to contribute your funding towards stock and expanding the company rather than tying a lot of the money into a mortgage, as commercial mortgages often require a large down payment.Fixing your property expenses so you know what is required monthly is another advantage of taking out a commercial loan to buy your business property. Removing the risks of rent variation can help with budgeting and help keep control over probably one of your company's biggest costs. Interest payments on a commercial mortgage are classified as a legitimate business expense.By renting, you can be far more adaptable as a business too - so for instance if you suddenly boom overnight and need to get a bigger office or factory, you can do so much quicker and easier than if you had a mortgage. Selling old premises and buying new ones is a lengthy process and means that you are far more 'tied in' than if you are simply renting when you can usually give 2-4 weeks notice and get on with the move.Obtaining a Commercial Mortgage To Buy Property: The obvious point about buying a commercial property is that the building itself is an asset that appreciates in value, and with every mortgage payment the company owns more of the building. This contrasts with renting as you own nothing and every time you pay rent, the money is dead and gone.Renting your business premises: For a relatively new or growing company, renting maybe your only viable option as you may not have sufficient trading accounts or capital to be able to apply for a commercial mortgage. You may also decide that buying stock or expanding your business rather than investing it all immediately in commercial property is a more viable option.Another reason that buying can be a better option is that you can let out part of your premises to other companies and take advantage of the capital from rental income.As mentioned earlier, deposits required for commercial mortgage are often very high so this can be a downside if you're a new company and don't yet have the funds available, but in the long term it is a good investment as the building is owned by you. Just make sure that you obtain buildings insurance so that you don't lose out if there is a fire or other accident. A lender usually requires this anyway.Conclusion - To Buy or Rent? If the capital is there, you're better off buying as a building is an investment, but overall you need to think about all the points above, before coming to a final decision. Don't rush in, take your time, and think things through thoroughly before you decide.
