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Owning commercial property vs. renting
If you were asked the question whether or not it's a good idea to own commercial property instead of renting it, the gut reaction might be: Buy!
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We're conditioned to thinking that owning a property, any property, is immediately the better option. With commercial property, there's a lot more to it than purely investment potential and fixed asset ledgers.
When weighing up your options in the commercial property market, you need to understand your expansion plans and the current economic climate. And, you need to consider and answer the following questions:
Can your business afford it? Really afford it? Bonds, variable interest rates, levies, taxes, maintenance and building insurance are just a few of the costs that crop up as a property owner. Not to mention your business will be tied in to the value of the property. If there's a dip in the market, your fixed asset value declines. On the other hand, when the market climbs, so does your value.
There are also added benefits of additional rental income if you're able to let or sub-let your property, and the sense of security that you're afforded by knowing your business has a home.
If you were to rent a commercial property, particularly for a small business, you have the freedom to relocate and expand based on your needs, and this may also afford your business a lot more flexibility and freedom by not tying up large sums of money in fixed assets. And, a big benefit is that the management and maintenance is often taken care of by the owner.
And a final note. You must remember that large deposits are required when financing commercial property, between 30 to 50% of the value. And, if you do purchase, seek professional legal and advice to be guided as to the correct structure to place the asset in.
Whatever you decide to do, make sure you think long and hard about what's truly best for your business in both the short- and long-term. Prioritise your decisions based on "What can we do now" and "What could we do later". Your business decisions have far reaching impacts on, not just your own future, but that of your staff, and consumers alike.
