As a business owner, there are great benefits to owning your business site and it’s essential to determine if it's the right move for your specific circumstances. Let’s run through a few key factors to consider when it makes sense to buy your commercial property.
Stability and Long-Term Growth
Established Business Model: If your business has consistent and reliable revenue, it indicates stability, making it a good time to consider purchasing property. Businesses with established customer bases and predictable income are better positioned to handle the financial commitment of property ownership.
Growth Trajectory: If you anticipate expansion, growth or increased profitability, buying property can be a strategic move.
Financial Readiness
Sufficient Capital: Ensure that your business has enough capital for a deposit, typically ranging from 20% to 40% of the property’s value. Additionally, having reserves for maintenance and unexpected expenses is important.
Access to Financing: Secure favourable loan terms with competitive interest rates. There are many options for commercial property lending either via banks or commercial brokers. It’s important to not pre-determine what you believe your borrowing capacity will be. Working closely with your accountant and your finance broker will ensure you access as many options as possible. Need contacts? We have great business partners within our ecosystem and happy to connect you.
Strategic Location
Consider Your Customer Accessibility: If the property is in a location that enhances customer access and convenience, it can boost your business. High foot traffic areas or proximity to major transport hubs are always great.
Market Demand: Analyse the local market to ensure demand for your business type in the area. Purchasing property in a growing or already established commercial hub can provide long-term benefits and appreciation in property value.
Cost-Benefit Analysis
Cost Efficiency: Compare the cost of renting versus owning. While the upfront costs of purchasing are higher, ownership can be more cost-effective in the long run, especially when you consider rising rental prices. Plus, you could set yourself up to pay off your asset within a reasonable time frame by contributing your rental and super*. You'll end up having a mortgage-free asset providing you with a great income in years to come.
*This could be in or out of SMSF which is a case-by-case scenario as to whether that’s the best approach for you. Ask your accountant and lender.
Tax Benefits: Ownership comes with tax advantages, such as deductions for mortgage interest, property taxes, and depreciation. These benefits can improve your financial position and make property ownership more appealing.
Complete Control Over the Property
Freedom to Renovate: Owning the property allows you to make modifications and improvements that align with your business needs without needing landlord approval. Customising the space for efficiency and customer experience can be a significant advantage.
Long-Term Planning: Ownership offers the security of knowing that you won't face lease terminations or rent increases, allowing you to plan long-term business strategies without worrying about relocation.
Asset Diversification
Investment Opportunity: Commercial property ownership diversifies your investment portfolio, providing a tangible asset that can appreciate over time. This can be an effective way to build wealth outside of your core business operations.
Rental Income Potential: If your business doesn't require the entire space, leasing part of the property to other tenants can create an additional revenue stream, further enhancing the financial benefits of ownership.
In Short:
Purchasing commercial property is a significant decision that can offer substantial benefits for your business. If your business is financially stable, located in a strategic area, and you seek greater control and long-term growth potential, investing in commercial property could be a wise move. Conduct a thorough cost-benefit analysis and consider consulting with financial and property professionals to ensure this decision aligns with your business goals and financial situation.
True North Buyer's Advocate specialises in finding sites, nationwide for business owners. We know it's more than buying a great property, it's about the nuance of understanding how a business will work in a particular area and a particular site. After 15 years as business advocates and business owners - that's our point of difference in the market. We know the detial involved.
If you're ready to explore the possibility of owning commercial property, now could be the perfect time. With the right approach and careful planning, you can secure a solid foundation for your business’s future success.
Get in touch with Vicki today for a discovery call.
