Most small and new businesses will not have the capital to buy property and renting business premises may be a better option. However, if you do have the capital, buying your own business premises can offer a number of advantages.
Advantages of buying business property
Buying a property gives you the freedom to use and alter it as you wish - subject to planning regulations or any conditions imposed by the bank. There are many benefits to buying a property. As you are in control, you can:
- have more flexibility over the management or repair of the building
- profit from the building when you sell it, if it gains in value
- let the property in the future and receive another income stream
- move when you wish - you won't be tied to a fixed-term contract
- forecast your costs with more certainty - particularly if you have a fixed-rate mortgage
Disadvantages of buying business property
However, there can also be disadvantages of buying business premises. Buying a property could:
- Tie up a lot of your capital, which could instead be used to set up and invest in your business. It may be difficult to recoup the capital quickly, or at all, if you decide to give up the business when there is a downturn in the property market.
- Leave you with negative equity or the threat of repossession if you cannot keep up with mortgage repayments.
- Cost you a lot of time if you need to make alterations or do some building work.
- Make you responsible for the safety of the building. For example, you need to keep up to date with and implement regulations for fire precautions and health and safety. Bear in mind that some leases also require this. See fire safety responsibility.
- Commit you to ongoing costs - see main costs of buying business property.