Handing back keys after vacating commercial property

Should you Lease or Buy Commercial Property?

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In Australia we’ve grown up with the idea that we should buy our own home, the phrase “rent money is dead money” has been drummed into our heads. This line of thinking often spills over into our business when deciding whether to lease or buy a commercial property but buying commercial property for your business is very different to buying your home.

 

Our clients often ask us whether they should be buying rather than leasing, and the answer will differ for each business and what stage they are at, however there are some important things to consider:

 

  • Banks will often require you to have a much larger deposit (around 30 – 50% of the property’s value) to borrow money to buy commercial property. Do you want to tie up so much capital in a property?
  • The maintenance costs of an owned property can be significant. Wouldn’t you be better off investing that money into your business?
  • Investing in a property means that you are likely to remain there for at lease five years – Is your business likely to grow and need more room before then?
  • Do you want to remain in the same location long term?

 

Still not sure which is right for your business? We’ve compared Buying and Leasing in the table below.

 

Leasing Buying
Your property costs are spread out over the term of the lease Initial upfront cost, but then lower ongoing costs
Cost of capital and structural repairs are paid by the Landlord Ability to make structural changes to the property to suit your needs
Free up capital to invest in your business rather than property You have an asset (hopefully appreciating) for the business
You are able to lease prime property in a prime location with less budget restrictions You have full control over the property and can make changes to suit your needs as your business grows
Ability to sub-lease if the property no longer meets your business requirements You can sell the property if you no longer need it
You have the flexibility to relocate at the end of the lease if your business needs change You can sell the property or lease it out if your business needs to relocate
No responsibility for the building if it is damaged due to fire, storm, floods, etc. Never having to rely on Landlord’s and Agents to arrange building repairs

 

Both leasing and buying commercial property requires a big commitment for a business both professionally and financially. It is important that you get it right the first time!

Feel free to contact us if you would like to discuss further buying or leasing commercial property for your business.