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Ten tips to consider when buying commercial property

Feb 21 2018

Darren Best

While some businesses searching for commercial premises choose to lease, for many buying can sometimes be the better option by offering more freedom and flexibility – which is key for a growing business and investment.

Purchasing commercial property is a sensible option for small and medium sized businesses looking to expand. However, it’s not easy. Purchasing a good commercial property can require a significant investment, in regard to both time and cost. There are a number of factors to consider, including where you want your business to be located, and how much money you can bring to the table, so it is essential to do your research.

Here are Savoystewart.co.uk’s top ten things to consider when buying commercial property…

1. Location, location, location

Location is very important when purchasing commercial property – just as important as when buying your own home. Think logically about what you will be using the premises for, and ask yourself key questions, such as the amount of staff it will need to fit, and will clients be coming for meetings frequently? Is this location where you want to bring your clientele? For the most part, a central location is desirable, however if you are spending most of your time dealing with clients remotely, a location set outside of town may be a better, and more cost-effective, option. Photo credit: Pixachi/Shutterstock

2. Research

Researching is vital. Look into long-term predictions for the location you are viewing property in – is there anything that may help or hinder property values in the future? A decline in value of your commercial property could decrease your business capital; time spent on researching the perfect location for your new business base is never time wasted.

3. Take advantage of low interest rates

When considering purchasing a commercial property, it is wise to keep a close eye on interest rates as they are constantly fluctuating. Although they won’t stay constant for a long period of time, it makes a mortgage an attractive option. Re-mortgaging your property will help to increase additional capital, which will be considerably cheaper than a business loan. If you do eventually decide to invest, you can deduct the tax from interest payments on commercial mortgages, which is highly beneficial.

4. Think with your head, not your heart

It is vital to be rational – don’t just jump head-first into buying a commercial property without doing your research and considering other options. In the short-term, buying a commercial property with a mortgage will undoubtedly exceed the cost of renting the same property. If your business is fairly well-established, with potential to grow, it is worth investing. However, if you are looking to set up a start-up, this is something to think about – it may be wise to rent in the short-term, then consider investing in a commercial property later on. Photo credit: ImageFlow/Shutterstock

5. Flexibility is key

When viewing commercial property, it is important to look for premises that is flexible. It is inevitable that your business will expand and change whilst you are occupying the property, so it is crucial to find premises that can be modified over the years to suit your business.

6. Don’t forget the deposit

Some businesses find it easy to forget that you will need to place down a large deposit, just like you would with a residential property. Think about how much money you have available, and whether you would be able to put down a substantial deposit. Remember, mortgage-lenders tend to ask for a deposit of 20% or more of the value of the property, and may even ask to see a business plan.

7. Get it surveyed

It is vital that you have a full professional survey carried out on the commercial premises before making a purchase. A basic survey will not do, especially when you are spending a considerable amount of money investing in the building. Whether it is commercial premises, or a private home, a survey is always a wise precaution to check for any problems before they arise. Photo credit: Roman Sigaev/Shutterstock

8. Can you sub-let the premises?

If the commercial property you are looking at purchasing is too big for your business at present, but you wish to grow, it may be worth looking into sub-letting. This can help to manage any cash-flow challenges and maintaining flexibility in your premises. However, this isn’t available for all commercial property, thus you will need to check with your mortgage-lender first and read your lease carefully for any clauses that may prevent sub-letting.

9. Don’t forget to budget

Commercial property purchases are rarely cheap. Remember to budget for any new furniture, as well as long-term upkeep and ongoing costs which will inevitably incur, just like in a home. Having some extra money in the bank can help to avoid any situations that may arise.

10. Consider parking

Parking is easily forgotten about. If the location of the property is near to a public transport, such as a train station or a bus stop, there are ways for employees to travel into work, however if you are based in an out-of-town location, a car park is valuable – not only for staff, but for clients visiting too. Feature image credit: Sergey Nivens/Shutterstock

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