Business premises: to rent or to buy?
If your business started out in a garage, you're not alone. In fact, some of the world's best-known businesses, including Google, Amazon, Microsoft, Apple and Harley Davidson shared these humble beginnings. However, every successful start-up should sooner or later get to the point where the garage isn't enough and when this happens, entrepreneurs are faced with a key question: to rent or to buy their premises. 3Cube Property Solutions takes a look at some of the advantages of both approaches.
Advantages of owning commercial or industrial property
The biggest advantage of owning your premises is that your real estate becomes part of your wealth creation. Given the right circumstances and the right property, your premises can lead your business to financial stability, flexibility and the ability to earn extra revenue by renting out any extra space that you may have. Being a property owner also gives you the option of refinancing your property if you should need extra capital at any point.
Owning your premises provides peace of mind. While it's important to remember that any rise in the interest rate will mean higher monthly payments, your business won't be exposed to sudden large increases in rent.
Businesses evolve and diversify all the time and being the owner of your premises means that you've got the space to expand if needed and the flexibility to reconfigure your premises to meet your needs.
Advantages of renting your commercial or industrial premises
Renting premises can be a great way to put a roof over your business's head without negatively impacting your cash flow. While buying property will usually mean finding a large sum of money to put down as a deposit, leasing a property requires only payment of your rent and a deposit.
If your business is new and still finding its feet, renting a property rather than buying one can give you the flexibility you need to move if you realise that your initial location was not ideal. Being a tenant gives you the flexibility to find new premises without having to worry about the time and expense involved in selling a commercial or industrial property. While it may be difficult to move before your lease period is up, being a tenant gives you the flexibility to rethink your position if you need to.
If you were to own your commercial or industrial property, you would be solely responsible for its maintenance, upkeep and management. This includes everything from insurance and security to fittings, fixtures and décor - requiring the use of funds, time and human capital. As a tenant, on the other hand, you are free to focus exclusively on building your business, leaving maintenance and associated tasks to the building's owner.
Also, being a tenant makes things a little less stressful if your business does not initially perform well, or if it goes through a rough patch at a later stage.
If you're a building owner and you are renting out part of your available space, you will soon learn that while the profits can make a big difference to your bottom line, managing tenants can be tricky. Being in this position is likely to necessitate getting assistance from a team of property management professionals.
There are various factors that need to be considered before making a final decision on whether to be a property owner or a tenant. These include market conditions and the state of the specific area where your business is based. For specific guidance and help in making the right decisions for your business, contact 3Cube Property Solutions today.