Buying Commercial Property: The Pros and Cons

The main points to consider to help decide whether buying commercial property is right for your business.

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Buying commercial property is a landmark moment for any business owner. The move demonstrates the business’ strength, its growth, and its intentions to move onward and upward to greater successes. It shows customers, suppliers, and partners the business’ commercial worth and will often allow for a good degree of expansion and the ability to hire extra staff.

However, it is not a good idea to rush straight into purchasing property without stopping to think about where you and your business are and where you intend to take the business in the coming years. There are many advantages to buying commercial property, but there are some catches too.

The Pros of Buying Commercial Property

- You can stop worrying about property owners unexpectedly increasing the rent.

- As the property increases in value over time, the business benefits from the capital gains.

- You may be in the position to fix monthly payments in order to afford yourself security over your outgoings.

- The interest payments made on commercial mortgages are tax deductible.

- With the agreement of your lender you may be able to sub-let a part of the property to another business so as to lessen the mortgage payments.

- Mortgage repayments are likely to be of a similar amount to the rent you would pay on a similar property.

- You can raise finance in future by re-mortgaging the property.

- Your operational flexibility is increased, as you are able to design the premises to suit the business and to rebuild and expand as the business continues to grow.

The Cons of Buying Commercial Property

- You will have to make a deposit of around 20-30% of the building’s value in advance.

- Upkeep and maintenance of the property is down to you to finance and arrange.

- Business capital will be affected if the property happens to lose value.

- Changes to interest rates could mean that mortgage repayments increase.

- You lose the ability to move quickly if circumstances change unexpectedly. It is not as easy to sell up and move as it is to cease renting and relocate.

- Purchasing property ties up a great deal of cash which could be invested in employees.

- Property ownership becomes a major part of the business, leaving you exposed to the fluctuations of the market. You will have a large, unproductive asset, which still incurs hefty costs.

Image: Garry Knight

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