If you are setting up a business or growing your home business, you might need to find a property to conduct your day-to-day operations. When you are looking for a space for your commercial needs you have two options available: buying or renting. Picking between these two options isn’t easy and you need to carefully consider your specific situation, as well as your business needs, before making the decision.
Here are some of the pros and cons of both options to help you make a decision.
The Advantages of Buying a Commercial Property
The following are some of the biggest benefits of buying a property:
- If you require a mortgage to finance your purchase, many lenders provide fixed rates for commercial property mortgages, guaranteeing you more security over a set period.
- The interest you pay for your mortgage is tax deductible.
- You won’t have to worry about sudden rent increases.
- If your property is located in a great location and the property prices in the area go up, your business’ asset value also increases.
- You might be able to sub-let part of your property and therefore generate more income.
The Disadvantages of Buying a Commercial Property
Although there are plenty of advantages to buying a commercial property, there are also some disadvantages. Here are the biggest disadvantages of buying your commercial property:
- Some mortgages might have a variable rate, meaning your interest payments can quickly rise.
- If the area’s properties lose in value, your business’ asset value will also go down.
- You are in charge of maintaining the premises, which can add more stress as well as cost you more money in the long-term.
- You might have to pay quite a large deposit upfront. This can be anything from 20% to 30% of the full cost of the property.
- If your business grows or needs to move, it might be difficult to quickly sell the property.
The Advantages of Renting a Commercial Property
You also have the option to rent a commercial property and there are quite many commercial properties to rent. If you choose to rent the property instead of buying, you might enjoy the following benefits:
- Relocating your business is easier, as you only need to follow the notice period and you are able to move your business elsewhere.
- You don’t need to tie a large sum of money as a deposit, and therefore organising the financing might be easier.
- Your business doesn’t need to worry about any possible fluctuations in property prices.
- You don’t need to worry about maintenance of the property, as your landlord is responsible for emergency repairs such as roof repairs.
The Disadvantages of Renting a Commercial Property
Despite the above benefits, there are some clear disadvantages to renting a commercial property. They include the following:
- Your rents might suddenly go up, which could put your cash flow under pressure.
- Renting is often considered disadvantageous, as you are paying money to your landlord and won’t own the property as a business asset.
- Your business won’t benefit even if the area develops and commercial property prices go up.
- Although there’s always a notice period, you might still suddenly face the prospect of having to find another location for your business.
Consider Your Options
It is essential to carefully consider your options before you make the final decision. Although buying a property always puts your business finances under more pressure in short-term, it is still considered a better, long-term option for many. Discuss your situation with a business advisor and look into different options before you make up your mind.