What you need to consider when deciding to buy or rent premises for your start-up business
Choosing to buy your own business premises is a big commitment, so make sure you consider all the pros and cons about whether it might be better to trade from rented premises or go ahead and buy.
There are benefits and drawbacks to both and what suits one business won’t necessarily suit others. It may be that the nature of your industry makes the ability to change location quickly and easily an important factor, or it may be that your line of business is historically linked to a specific location that renders the ability to relocate unlikely. Whichever, there are a number of basic pros and cons to buying.
Advantages of owning business premises
- You own an asset that will potentially increase in value.
- Your mortgage repayment is likely to be cheaper than a rental payment on the same property, and isn’t simply going into someone else’s pocket.
- You have more control over your budget and therefore more security because you won’t be exposed to any hefty rent increases. Additionally if you take out a fixed-rate commercial mortgage, you’ll be able to set budgets knowing exactly how much you’ll be spending on the premises each month.
- If you aren’t going to use all the building space, you can sublet part of the building and recoup some of your outgoings.
- Interest payments on a commercial mortgage are tax-deductible.
Disadvantages of owning business premises
- Cost! Unlike renting, you’ll need to come up with a considerable deposit that could be used for other, more pressing business purposes.
- If you own premises it’s far harder to relocate your business if market forces demand or opportunities arise. Extricating yourself from a rental agreement is much easier than selling premises or finding a new tenant to take them over.
- Owning a property also comes with responsibilities – you will be responsible for maintenance, fixtures and fittings, decoration and security.
There are other considerations to take into account if you decide to buy a business premises, such as the value of the property, and you may need to seek expert advice. For more information on buying business property have a look at our sister company Startups.co.uk’s guide on what to consider before taking on business premises.