The Definitive Guide To Buying Or Renting Your Business Premises

If you are in business then one of the most daunting decisions you are likely to ever make will be to either rent or buy your business premises. Will the offices, the factory or the warehouse turn out to be your biggest asset or your biggest expense? Making the correct decision at the correct time could have a significant impact on the success or otherwise of your business.

If you are likely to need to move premises in the near future, then leasing the commercial property may be a good idea in the short term, as buying can involve many costs that you will not want to incur on a regular basis. But buying the property is probably the best option if you would prefer to fix the costs of your buildings and buying is also an investment, with potentially high gains in value over time. Before making your final decision however, ensure that you have clearly thought it all through.

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 do not have the historical accounts to prove your businesss 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.

One of the best points about renting over buying is that you are not responsible for certain costs. The landlord will usually cover the costs involved with maintenance such as fixed broken windows and water pipes, as well as any redecoration and modernisation that is required and costs for security. As a tenant you will also avoid the issue of the property value dropping if the property market falls.

Leasing your premises can also offer more flexibility, so that if you do expand you will be able to easily and quickly shift to a bigger commercial property. The costs involved with moving if you are renting a building are much lower than the costs involved with buying and selling, as you have to take into account stamp duty land tax as well as the legal costs and lending costs of the mortgage.

One thing you will need to be aware of is that currently deposits sizes for a commercial property range from between 20 and at least 30 percent dependant on circumstances. So your business will require plenty of capital. One other downside could be that once the property is owned, your business will lose a certain amount of flexibility in terms of moving or expanding.

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.

Renting provides a more flexible option should your business need to move, expand or contract. Businesses that suddenly need to expand or contract can find it easier to do so if their premises are rented than if owned. In summary relocating is much easier to manage if you rent premises than own them.

Renting a commercial property also eliminates many associated property costs. You will not generally be liable for maintenance, decoration and repair costs, saving your firm a substantial sum. And, renting premises means that you are not adversely affected by a slump in property prices or by large hikes in interest rates. Whilst your rent and rates may rise every year, other general economic factors will have less of an impact.

Verdict: Only by analysing the specific needs of your business will you be able to determine whether renting or buying is right for you. So, it is crucial that you take all the above factors into account before applying for a commercial mortgage to buy property or signing a long term rental agreement.