Putting your money in bricks and mortar has long been championed as one of the soundest investments around and with a combination of lower commercial property prices and interest rates, the same could be true for a growing number of SMEs.
What are the Pros and Cons of Commercial Mortgages?
Those looking for a place to base their business could well find it cheaper to take out a commercial mortgage rather than renting, but with so many factors to consider when deciding if buying is the best choice for your business, we look at some of the pros and cons of stepping onto the commercial property ladder.
Reasons to Buy…?
Added value – Commercial premises are an asset for your business that could increase in value over time, boosting capital and adding value.
No rent rises – By buying your commercial property, you’ll be protecting yourself against sudden rises in rent, which would have the potential to put pressure on your cash flow.
Managing your cash flow – Mortgage repayments are likely to be similar to, or even possibly lower than your monthly rent. A fixed rate mortgage could also help you plan payments for the long term.
Tax benefits – The interest portion of your mortgage repayments are tax deductible.
It’s all yours – You’ll be free to redecorate and redesign to make the space work better for you, without any restrictions which would otherwise be placed on you by a landlord.
Reasons Not to Buy ….?
Deposit – There is no getting away from the fact you’ll need a decent deposit to purchase a commercial property, money which could potentially be used in other ways to grow and develop your business.
Relocation – If you did decide to relocate your business, it’s obviously more difficult to move when you own your own premises. Before buying, be sure to do your research and be as sure as you can be that you’d be happy to stay in the area long term.
Wear and tear – From day to day maintenance to urgent repairs, you’ll be responsible for ensuring the premises are a safe and pleasant place to work.
Interest rate rises – Although interest rates are currently low, a variable rate mortgage could leave you vulnerable to interest rate increases.
Falls in value – Property values can never be guaranteed and could be affected by factors outside your control. If the value of your property falls for any reason, this will reduce your capital.
If you’re currently weighing up your options when it comes to finding your first business premises, your Financial Adviser can provide help and guidance