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Start Up businesses may face challenges with funds and also for businesses that may have been operating for a while. Nonetheless, it’s important for you to evaluate your whether you would like to rent or buy property.
Buying property can be satisfying knowing that you have an asset and it can grow in value over time. You can also borrow against the property. Renting property will give you flexibility if you need to scale up or even move to another location.
2. What are your options?
As a start up business, you would probably want to manage your costs tightly and even work from home. As your business grows then you may want to lease or buy a property for your business.
For the more established businesses, it may also want to invest in property rather in various locations supporting its operations.
Either way, it’s a big decision for leasing or buying property. Make sure that you understand the contractual arrangements and that you are able to de-risk your business. You have to make your business work so work hard on a contract that is favourable for you!
3. Buying Property
Buying property is suited to businesses that have:
- enough capital to invest (strong balance sheet)
- a good sales pipeline
- good long-term contracts
- a good market penetration
- a good market presence and is well established.
3.1 Pros and Cons
|The business will have an asset||Locked in a particular location|
|Long term investment||The business is responsible for maintenance, insurance etc.|
|The property value can increase||The property value can decrease|
|Interest rates can change and increase|
|Require cash upfront for transfer duties, deposits etc.|
4. Draft Purchase & Agreement
If you are considering buying property, then you may want to download the draft Purchase and Sale Agreement.
4.1 Leasing Property Pros & Cons
|No need for significant upfront cash.||Landlords can be problematic, for example, they may not do maintenance regularly or resolve issues fast enough.|
|More choices for rental.||Depending on the type of lease agreement, your exit clause might be tight and will hold you to stay even if your business is not doing well.|
|Does not have to be long term and can move fairly quickly.|
|Maintenance is covered by the landlord.|