If you’re considering buying a commercial property it’s important to assess the best means of doing so before you start your search. Such a purchase is a massive investment and hugely important to the future of your business; it is therefore not one to be taken lightly. You could rent, of course, but if you have the funds available to you there are numerous advantages to buying – the relative stability of a fixed rate finance verses the potential for rent reviews, the possibility of market growth that could see the value of your commercial property asset rise, and the chance to develop a new income stream through letting out space in your building.
A mortgage is the most common method of financing a commercial property purchase. As with residential mortgages, you will probably need to contribute a percentage as a deposit (usually somewhere in the region of 25%), you will need a healthy credit rating, and failure to meet payments on time will put your commercial property at risk.
How you attain the mortgage for your commercial property purchase is totally up to you. Specialist mortgage brokers can often give you a broader view of the market than going directly to a lender but then you have to factor their fees into your calculations.
Of course there’s no rule that says you have to buy with a mortgage. If you wish to purchase your commercial property outright with the sale of assets, outside investment or the use of a good year’s profits to finance the deal you can, but it’s important to fully assess the risks and rewards of investing such a large sum in property. Could the money be more profitably used elsewhere, could this expose your business to future cash flow issues, and so on?
Careful consideration must go into your risk assessment to decide whether what your company gains in bricks and mortar it risks losing in flexibility and mobility. What’s right for your business?
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Profiting from commercial property investment
