Should you rent or buy your business premises?

​Property rights

Owners have more freedom to use the property as they please. For instance, if there is enough space on the premises for an additional business, you can supplement your income by leasing it out, without legal implications.

If you are renting the premises, you need to get permission from the owner for all the changes you would like to make, and you might not be allowed to sublet. On the positive side, maintaining the property will be the landlord’s responsibility, depending on your lease agreement.

Business certainty

Owning your business premises provides a level of security, as rental contracts might not be renewed or the owners can decide to evict tenants. For the renter, aside from running the risk of losing customers, you will also need cash reserves to fund the relocation.

Another benefit of owning your property is that you can be sure that the monthly bond repayments will only change if there’s a change to the prime lending rate. As a tenant, your rent payments can escalate annually or when your lease is renewed.

Investment

Just as owning residential property is a great investment, so too is owning commercial property. By owning the premises, you’ll ensure the capital growth of your asset, as well as annuity income. Whereas when you’re renting, you will be paying off someone else’s investment.

Before committing to one option or the other, ensure that you understand what your business and unique circumstances require. 

Aldes Business Brokers is your partner in finding a business that suits your needs perfectly. We specialise in buying and selling businesses and will be with you throughout the whole process. Visit www.aldes.co.za for more information or contact a consultant near you.

The information provided in this article is for informational purposes only, and does not constitute professional advice.