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Tuesday, 18 June 2019
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This Old House - Do-it-Yourself

The Benefits of Commercial Property Purchases, and What Comes Next

Written by Posted On Wednesday, 22 May 2019 02:57

While there are undoubtedly some benefits associated with leasing a building, there can be many more if you decide that ownership is right for you or your business. However, before you start looking at different commercial finance options, discover if purchasing a building for your business is the answer. Read on to learn the benefits and what comes next.

It’s an Asset that Can Increase in Value

If you have extra capital to play with, then there’s every reason to look at your commercial finance options to purchase a building. Unlike cars, bikes, and boats, commercial property is something that often goes up in value, rather than down, especially as you add value to it over time. Play your cards right, buy in an area with potential and property that shines, and watch as your investment increases.

You’re Protected from Rent Increases

In a competitive market, it’s not uncommon for rent prices to increase. You see it with the residential market all the time. If you go down the commercial finance route so you can buy a building, you don’t have this problem. You can pay back the loan, but you don’t have the hassle of a landlord who can put your rent up at a moment’s notice.

On the other side of the coin, if you decide to buy a building – but it’s not right for your business – you can rent it out. You can take advantage of the shortage and find a tenant who’s willing to pay the going rate. It’s then another income avenue for your business while also being an asset.

You Have Control Over Everything

Want to make some décor changes? Feel that some aspects of the building don’t work for you? Change them. When you choose commercial finance over rental agreements, you’re signing on for the freedom of being able to make any changes you like. However, you are subject to council consents for any significant alterations (like everyone else).

If you decide to rent the building out, you can set parameters for what the tenants can and can’t do. Be clear and protect your investment.

Additional Income Stream

Even though you will need to put together a deposit and pay back your commercial finance, your new purchase will soon become an income stream. Make sure you do your Return on Investment (RoI) homework before you dive in. Otherwise, it will be many years before you begin to make a profit.

Once you do, it’s smooth sailing. In most cases, the tenant will take care of insurance, rates, and costs associated with running their business from your building.

What Comes Next?

If you have decided that commercial finance and being a landlord is your idea of sensible, then it’s time to progress. You’ll need to look at your finance options, figure out your ownership options, and talk with your lawyer. Let the fun begin!

1.  Look at Your Financing Options

If you have spare capital in your business, then it’s likely that’s the reason why you’re looking at purchasing a building in the first place. You then need to use that capital to get your foot in the door with commercial finance. Non-bank solutions are quick, painless, and straightforward.

2. Assess the Property

It’s now time to choose a property and assess it. Obtain a Land Information Memorandum (LIM) report, which outlines the local council’s knowledge of the property. That could include land features, permits, sewerage drains, unpaid rates, consents, certification, District Plan classifications, and more. The more research and homework you do about a property, the surer you can be that it’s the right one for you.

3. Decide on Your Ownership Options

Talk to your commercial finance providers about how you wish to buy the property. Will your business buy it, or an individual? Alternatively, will it be in partnership with someone else or a trust? A building can be in someone’s name or under the ownership of an entity or business. Take your time to think about which will be the best option for your situation.

4. Buy the Property
With all the boxes ticked, it’s now time to make the leap. Talk to your lawyer and get help to handle the sale. Your lawyer can also help you understand your legal requirements around the purchase, such as any GST owing. When you make your offer, do so with conditions. Conditions could be anything from confirming a tenant’s lease or arranging finance. You’re now ready to purchase commercial property. What an exciting time!

Conclusion

There’s nothing wrong with leasing a building for your business, but there are many benefits of taking the leap and becoming a commercial property owner yourself. Get in touch with a financing expert about your commercial finance options then get the ball rolling. You’ll be a high-flying investor before you know it.

 

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