When it comes to business premises, leasing is by far the most common choice. However, it is not the only available choice, and many business owners prefer to buy their company’s premises instead. In this piece, we will outline the pros and cons of owning your business’ property, so you can decide if this route would be suitable for you and your company…
- Greater control. One of the most significant downsides of leasing a property is the fact that you have relatively limited independence to make decisions relating to that building. If you decide that you want to install TPO roofing to help better reflect the sun’s rays, revamp the business’ frontage, or upgrade to more energy-efficient windows, you’ll usually have to seek the permission of the owner to carry out these improvements – and there’s every chance they might refuse. In contrast, if you own the property, you can – providing you stay within building regulations – largely do as you please.
- A more stress-free experience. As a tenant, you will always be subject to the decisions of the owner. If they decide to increase your rent or even to sell the building, then your entire business can be disrupted.
- The potential to profit in the future. A property is, and always will be, an asset, which means that you can sell the property in the future – and, if the market has risen since you bought the building, you could make a significant profit from doing so.
- Maintenance costs. When you lease your business’ building, you are not responsible for much of the maintenance – if there is a serious structural issue, for example, then the issue can simply be referred to your landlord. As a result, you can avoid expensive repairs and maintenance by choosing to lease; repairs and maintenance that, as the owner, you would be responsible for.
- Extra responsibilities. Property owners have to ensure that they comply with all legislation and requirements for commercial buildings, some of which can be very extensive. These extra responsibilities ultimately place an additional bureaucratic burden on your company, and can also be more expensive, especially if faults are identified that you then need to fix.
- The risk of negative equity. In the “pros”, we touched on the potential to make a profit by selling the property in the future – so it is important to take into account the other side of that equation. If you pay a certain price for the property, and then the value of that property falls (usually due to a struggling market or economic circumstances, such as a recession), you could owe more than the property is actually worth. Should this happen, then you’re essentially stuck with that property unless you decide to sell at a loss. While this issue is fairly rare, it is nevertheless a risk you need to be aware of before choosing to buy.
The above points should help you decide if buying your own business property could be the right choice for your company’s future.