When your business starts to take off and make more money – there are a couple of things that usually happen. For freelancers and business owners with one to three staff, everyone might be happier working remotely. But the more people that you need to hire, the more space you are likely to need, and one of those things is office space.
Moving your business to an office building can be a big decision, and the first thing that you’ll need to decide is if you want to rent or find commercial real estate for sale.
So the big question is – should your business rent or buy a property?
There are advantages and disadvantages to both.
Renting a commercial property
Renting comes with many advantages, but it isn’t for everyone. A lease can be a liability in its own way. But for smaller companies, the idea of a short-term rental can be incredible.
The advantages of renting a commercial property are:
- No large deposit.
- No loss if the property value decreases.
- Most maintenance is done by the owner.
- Can be furnished.
Disadvantages of renting a commercial property:
- Any changes you make will not give you a return on the investment.
- Rents can increase with little warning.
- No benefit from increased property values.
- Limited to the usable parking.
Renting a commercial property often suits very small businesses as they test out how their cash flow looks for a while.
Buying a commercial property
If you are a new business, lenders might be hesitant about how much money they would be prepared to lend you – if any at all. However, they are likely to offer you what you need if you have been in business for a while with a few years of records.
In the case of a very new business, you might be asked for a larger deposit and offered a higher interest rate too.
Advantages of owning a commercial property:
- It becomes a business asset.
- The property could increase in value.
- You can have fixed mortgage repayments – check with your Mortgage Broker
- You can modify the building internally and externally as you see fit.
- You can sublet parts of the building.
- If you hit times of trouble, you can sell the building to recoup.
Disadvantages of buying commercial property:
- Property values can decrease, and you could end up making a loss.
- You’ll need to cover legal fees, valuation fees, and stamp duty as a minimum when buying, which can run into thousands.
- You’ll need to find a deposit that could be as much as 30% of the purchase price.
- Mortgages can be unfriendly to newer businesses, and if you don’t get a fixed mortgage, you might end up with a variable rate that can balloon from time to time.
Owning a property attached to your business can be a great opportunity to expand your business because once you have more assets, you have more leverage too. You might have other things on your mind though; you might want to use your business success and income to buy a new residential home: Property Comeback: Your Chance to Buy at a 50% Discount?
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)