Should Your Business Buy Property?
Your business has grown from you and your laptop to swanky office space in the city. One day you realize you have been helping your landlord get equity for a few years when you could have been gaining it for yourself. Is it time to buy your building? There are many obvious advantages to owning property. You can build equity and don’t have to worry about the landlord hiking up the rent during a difficult point in your business. Moreover, Forbes points out that real estate has an important role in a diversified investment portfolio. However, buying property is a big step and you should consider your situation carefully before diving in. Here are a few things to consider:
Can you afford it?
The simple question: can you afford the downpayment? Think realistically about whether you are ready to spend this amount of money. Even if the cash is there, if spending it would compromise the liquidity necessary for your business operations, maybe it’s better to wait.
Depending on your financial situation there are many ways to purchase property. For example, a commercial real estate loan is based on the value of real estate offered as collateral, as well as the credit of the borrower. Search around and discuss the situation with your team and investors to see what option is best for your business.
Is this area really a good fit and how long will you stick around?
When you buy property you are committing to staying in the area for the foreseeable future. As well as business concerns, consider whether it is a pleasant area for your employees to work in. Is there adequate parking, how far is the nearest station, are there restaurants and shops in the area.. These are also questions you should be asking. If you intend to retire from the business within the next ten years, buying may also be too much of a risk.
Can you handle the responsibility?
If you are renting you are at the mercy of your landlord but, on the other hand, if things go wrong it is his responsibility to fix them. Perhaps if you have a handyman on your team you will embrace the opportunity to use your skills and the freedom of being able to do what you want with your own building. However, if no one on your team has the ability or inclination to fix a leaky roof or an electrical issue, perhaps you will see this kind of work as a distraction from your main work and it’s best to keep renting for a while.
Buying your building can be a great step and offer a lot of freedom and benefits. Consider carefully if it is right for you and good luck on your real estate journey.