When is the right time to buy your own office? I'm sure as a business owner you may consider this question many times throughout the life of your business. For a period of time, leasing a property may be the right decision for you and your company, leasing provides many benefits including from flexibility to freeing up cash flow. When business is good, the economy is strong, and the stars align you may consider buying a commercial property.
The decision to buy vs lease should not be based on financial position alone. Some large corporate organisations have a combination of both leases and key properties. This is perfect for large companies as the decision to buy vs lease is much less emotional than for smaller business owners.
SME business owners have some big emotional decisions to make when it comes to purchasing commercial property. Just falling in love with a space doesn't mean it is the right place for you to invest your hard earned cash. It's also worth knowing that most companies, without even trying, are in the real estate business, a property provides the opportunity to produce goods and deliver services, and without it most business can't do either. So, when you are nagged by the thought of purchasing your own space, there are many internal and external factors that will and should affect your purchase outcome.
- Low up front capital
- Lease time frame offers options in terms of length that may suit your business needs and growth
- Better short and long term flexibility
- Some service and building issues are paid for and managed by the owner
- Minimal property expertise required to enter into a lease
- Building ownership can change
- Potential to miss a lease extension or option causing you to have to move premises
- High exposure to market fluctuations relating to rents
- Dependency on third party property management and service provides for service issues
- Properties are an asset and attract a property value appreciation
- At some stage through the purchase cycle, ownership becomes less expensive year on year
- Tax benefits (where available)
- Control of quality of property management and suppliers
- High upfront capital required
- High time investment on non-core business
- Ownership of your property should be separate to the core of your business and requires a bundle of time, real estate expertise and resources to set up and maintain
- Less flexibility
- Potential loss in asset valuation
- Exposure to economic/interest rate fluctuation
As with all financial matters to do with your business, seek advice from your finance team or business accountant whether buying a commercial property is perfect for you.