Renting vs. Purchasing a Commercial Property as a Startup

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Purchasing a Commercial Property

Founding a business can be an interesting and exciting time in life, but it can also be incredibly stressful. Especially when it comes to deciding where your startup HQ will be.

Which means you need to choose whether or not you buy or rent your commercial property when it comes to being a startup? Here are a few pros and cons to buying a property, which may help to sway your mind.

Pros of Buying a Commercial Property

Here are some of the best pros for buying a commercial property as a startup:

Avoid Rent Reviews

Buying a property gives you one good advantage when it comes to your startup; you can avoid rent reviews for an indefinite period of time. This means that once you’ve grown comfortable in your location there will no surprise rent hike to force you to move. Especially ideal if you want to stay put in one place for an period of time in order to help your business grow without any unforeseen hiccups.

This can be especially important if you are based in an expensive or central area. As some commercial rental properties do tend to offer attractive rates to startups in the first few years, then raise the prices painfully high once that initial stage in the contract is complete.

Update Property Easily

A rental property agreement can come with a contract that is full of rules and stipulations. Which, unfortunately, can really restrict what you can and can’t do when it comes to updating your office/warehouse/etc. Of course, this issue vanishes when you own the property yourself. Any update you deem necessary can be completed without having to check first (unless you need planning permission for extensions or anything of that nature).

Long-Term Stability

Having a firm hold of the destiny of your business can be an amazing first step. Especially in the initial stages of setting up. You’re not beholden to unseen powers or landlords and have the ability to choose what happens to your business more or less.

The property can also act as good equity, which can then be used as collateral for any future expenses. So, if you later need a cash injection for your business then it is possible to get this as a result of selling your property on. You can also use it to help push your business further and move to a bigger, better office, down the line as well.

Cons of Buying a Commercial Property

On the other hand, here are some of the cons to buying a commercial property:

Lose Money in the Long Term

The fact is that commercial property is very beholden to the market when it comes to its value. So, a bad year for the property market could easily plumet the value of your property overnight. Potentially seriously reducing your initial investment. Something you can very much avoid if you simply rent, as the value of the property makes no difference to you.

Restricts Cash Flow

To first buy your own commercial property you will likely need a rather large initial deposit. This means that following this, and for some time after, the positive cash flow of your business could very seriously be impacted. And this can be quite negative overall as you may need that cash flow for other reasons, such as hiring more employees or getting new software in order to expand your business capabilities as they stand.

Ultimately, it could be better for your business to maintain a more fluid cash flow rather than tying it up in property.

Reduced Flexibility

If you have too much space or too little space it can be a problem, especially as a growing business. Problems which can be exasperated should you choose to buy a property as soon as you pass go. As, moving to a larger or smaller premises on the back of this can be much more difficult to achieve.

Less Choice

On the whole, there is much less choice on the market when it comes to commercial property. So if you are looking for something specific then it can be quite hard to manage overall. You may find more choice in terms of location, amenities and even size by simply looking for something in the renting market.

Of course, this is a very tough choice to make and it shouldn’t be done without the appropriate level of advice. You should at least get the advice of a property management team before making a final decision, as there may be more pros and cons which you may not have considered. Or which may not even be obvious to anyone other than a professional. Ultimately, you need to make the best decision for the sure success of your business moving forward.