By: Simon B
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Before you contact a commercial property agent, you will need to decide whether you want to buy a property or lease one. Which of these is right for you will depend on how you see your business growing and changing in the future.
If you envisage rapid expansion then leasing would represent a more flexible option than buying. As your space needs increase, you won’t have to go through the hassle of selling your original premises.
On the other hand, although buying will not afford you as much flexibility when changing properties, it will generally allow you more freedom of action as an owner rather than a tenant. For example, if you want to make changes to the property, you will not have to waste time and money obtaining the landlord’s approval. You will also not have to get involved in negotiations over rent and lease reviews.
There are many factors outside of your own business that could have a bearing on your decision to lease or buy – fluctuations in the property market, for example. If you anticipate rental rates to go up rapidly, it may be unwise to lease.
If you own the building, this will obviously represent a significant asset, which will allow you to borrow against it and lease out it to other businesses. You would benefit from any future appreciation and not have to worry about increasing occupation costs.
Getting a mortgage for a commercial property
For small businesses, the most common form of finance for purchasing a commercial property is a commercial mortgage.
These are offered by a variety of lenders, including High Street banks, and the terms and costs can vary. You can compare and arrange deals by yourself or employ a specialist commercial mortgage broker.
You will need to pay quite a hefty deposit, as a commercial mortgage is likely to cover around 70% to 75% of the value of the property. Remember to factor in additional costs you will have to meet, such as interest payments, conveyancing and capital repayments, as well as broker fees if you use one.