As a business grows a big question that they face is premises. In the UK, for most SME’s the default position has been to opt to lease. This is understandable when leasing tends to offer more options and usually much greater flexibility. However, in some instances leasing is not the better option and thought must be given to what benefits there might be from buying the property.
For those considering buying a commercial property, they will first have to consider affordability. An option available that will help remove the barrier is a commercial mortgage as part of a genie business loan. Before going down that route it is important to first look at all the benefits of buying over leasing and decide if its right for you.
When buying commercial real estate, you are deciding to invest in a long-term asset which will offer greater returns than leasing. Each month a business will pay either a lease payment or a payment towards a loan or mortgage if they have purchased their own property. The benefit of paying the loan or mortgage over the lease is that each payment goes towards paying down the initial money borrowed. This will mean when the business decides to refinance or sell the property, the difference between what is owed and the market value can be added to the business as equity. This is in stark contrast to leasing where money is paid to a landlord and no return on that will come.
Following on from equity is the benefit of asset appreciation. When you are the owner of a business premises any changes in the market value will affect you as the owner. If the market has an upturn, you can then take advantage of the increased value in your property.
This might not be an option for every business who owns the commercial real estate, however, it can be considered for some. If the commercial space that has been purchased is larger than the businesses requirements any remaining space can be rented to tenants. This will then provide regular monthly rental income to help towards the payment of the loan on the building. It is important to keep in mind, however, that if leasing any space that you become the landlord and may want to consider a property management company that can deal with the headache that might entail.
Control of Your Property
If renting or leasing a space for your business, you are at the whim of your landlord. This is especially true if you are only leasing part of the overall space in the building. You will have no control over who will occupy the remainder of the property, be it a competitor or otherwise. You will also have no control over changes which are made to future lease prices, how the property is managed or any cosmetic changes that the landlord opts to make. This is not the case when it is your commercial property, you are completely in control, and that is a nice feeling to have.