Buying a property for your business
Provided by Business Partners Ltd, South Africa's leading investor in SMEs
If you're thinking about buying commercial property, knowing the ins and outs of buying in this sector will ensure that you make a sound investment with both short and long-term rewards.
Buying a property for your business is a big decision to make, so do your homework before you commit to something you can't afford right now. Let's explore some of the most important issues around buying a business premises. Get out some pen and paper and start making notes.
The up side
Many experts agree that owning property is always a good investment. Owning your business premises definitely has some advantages:
- With each bond repayment, you're building on the equity of your own asset rather than paying money to a landlord
- If you've bought under the right circumstances, the value of your property will grow over the years
- Buying a property offers various tax advantages, both as the property owner and as a landlord
- Much like buying a house, you can decide how best to use your space - the interior design, renovating or remodeling to suit your needs, plan for maintenance, etc
- In the same vein, you don't have to comply with the rules of a difficult landlord, rent increases and complicated lease agreements
- You can lease any unused space to other small business, which will help with maintenance costs and loan repayments
Where is the money coming from?
Buying a commercial property is a huge commitment financially, so make sure you have the means to ensure the investment is profitable for you and your business.
- Work out what you'll pay on a bond vs what you'll pay in rent. Factor in the costs of maintaining the property, taxes, insurances, any rental income and any other costs that could come up
- After you've covered all these costs, are you left with any disposable income? You need to have reserves for anything that needs to be done to the premises on a monthly basis and maintenance costs can add up
- Shop around for good loan terms, interest rates and so on. Get some expert advice in this area to make sure you're getting the best value for your money
Looking at the big picture
Ask yourself what your long-term goals for your business are and anything that may happen in the future. For example:
- How much space do you need - now and in the long run? Will you consider leasing some of the empty space until your business grows?
- If your business is growing quickly, buying a premises may not be a good idea for now
- What happens when you want to close or sell your business? Is the property in an area popular with investors? If you do need to sell quickly, how long will it take to sell?
Call in the experts
The commercial property market is a complicated one, so don't try to do this without getting in some experts in this area.
- Use a knowledgeable and reputable commercial realtor to find your property. This will save you a lot of time and hassle
- Give the agent a clear brief of what you are looking for, the size and type of property, the location, neighbouring businesses, plans for growth and so on, so he/she is able to provide you with a short-list of appropriate properties
- Do your sums before-hand, so know how much you can afford and whether you want a premises ready to move into, or if you're prepared to do some renovations or upgrades to suit your needs
- When you've found the right place, only approach lenders that specialise in commercial property loans and have a good track record. If you can, find out whether you can get a pre-approved loan so you know exactly what you can afford
- Employ a financial advisor who deals with small businesses to help you structure your current and future finances so you're 100% sure you can afford the costs of buying and maintaining your property, while still having a steady cash flow for running your actual business
- Use your own commercial property lawyer to explain the sale terms to you and draw up contracts and paperwork related to the sale
Property management with the SME in mind
Business Partners Property Management Services offers a variety of professional services to entrepreneurs looking to invest in commercial property. Not only do they provide financing for a wide range of commercial and industrial premises, but property broking and management expertise to match the needs of each individual SME and/or entrepreneurial investor with the right property.
The comprehensive range of broking and related services offered include:
- property valuations, marketing and sale of properties
- assistance with sub-divisions and sectional titles
- finalising of sales agreements and/or monitoring of property transfers
- due diligence (which will identify any red flags)
- procurement and screening of suitable tenants for rental premises
- negotiation of lease terms
- rent collections
- buyer and seller consulting services
- consultation on new developments
- short-term and long-term maintenance planning
Now that you know what you're in for, you can make an educated decision about whether to buy a property for your business and how to go about doing so.
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