The Good, The Bad and The Ugly of Commercial Property Purchase
The Good, The Bad and The Ugly of Commercial Property Purchase
Buying your own business premises is the ambition of many companies. Having a secure, stable base from which to run your company can be a huge benefit as can the capital you can accrue by owning your own property. However, there are many pros and cons to buying your own office or retail unit. Taking out a commercial mortgage is a big step so before you commit, read our guide to the main pros and cons of owning your own commercial property.Pros: Of the many good reasons to consider a commercial mortgage, one of the most important ones is the fact that you are cutting out the middleman, ie the landlord, in your monthly property payments. If you own the property then your only payment is directly to the bank, which should make repayments lower.Another good thing about commercial mortgages is that you can fix the rate of interest, so you will always know what the repayments will be - well, at least for the 'fixed interest' period, which is usually anywhere between 3 and 10 years depending on what you prefer to do. This means that you are a little more stable, as often when you are tenant your rental payments can be increased at any time often with little or no warning from the landlord.Not only is the property itself an asset to your business, but you can also become a landlord yourself and rent out part of the building if it's big enough. This additional income can really help, and you can always put it towards your commercial mortgage repayments which should help with your monthly outgoings.Secondly, owning commercial property that is too large for your needs means that you can expand your business in the future without having to relocate to new premises. When you need the additional space you can end the tenancy and use the premises to grow your own company.Remember, buying a property is an investment, not just expenditure so it's a great business venture if you're in a position to be able to afford it.Cons: Firstly, the issue of cash. If you want to purchase a property then a significant sum of money will have to be raised in order to do so. Banks and other lenders will typically expect around 25 per cent of the value of the property to be raised by the borrower as a deposit. This is a sizeable sum and in these wintery economic times, it's cash that is hard to come by.Even after expansion has been considered and you've still outgrown your premises, moving to a larger base of operations can be a slow process. The buying and selling process for a commercial property can be a patience tester and then time consuming when you do find a buyer, with a lease the wrapping up process can be an easy process in comparison.As for the last round of negatives: the costs don't stop with a just the mortgages, half a dozen insurance types and policies will be needed, liability, contents, building etc. Then let's not forget the maintenance costs, which have to be dealt with quickly especially if you are subletting to other companies, so you can expect to fork out for any damage or maintenance needed that happens on their part of the property.If you're looking for solid grounding and foundations for your business (with an eye on future expansion) then taking on a commercial mortgage can be the more beneficial option to take. All we can say is just don't go in blind, do your research and impartially balance all the positives and negatives and be firmly committed to the idea of a commercial mortgage.
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