Should You Own or Rent Your Commercial Property?

Should You Own or Rent Your Commercial Property?

You’re asking the wrong question.

Clients ask us all the time, what do you think about me moving the business to a property I can buy so I stop paying rent? After all, it's dead money. I'm sure you've heard plenty of people say renting is dead money, but I'd have to disagree.

For me this question is really two questions;

1) What is the best possible location for my business to achieve its potential?

2) Can I buy this property, and if so, is it a sound investment?

Sometimes SME owners fear they aren't being 'smart' by paying rent. This is incorrect. Paying rent for the right property for your business can be a brilliant strategy, on the basis you know your business vision and strategy, and have negotiated a lease that is value for money and gives you enough security to create the physical space your business deserves.

We believe your business can be your biggest asset, so that begs the question: is sacrificing the quality of the location of your business to get into a property that you can afford to buy a smart decision? The answer is of course not.

Don't get me wrong, if you don't have the opportunity to purchase where you currently rent, and you are in a position where you could buy a property down the road (maybe utilising your superannuation savings) and it wouldn't adversely affect your business, or better yet improve your business, then it can be a no brainer.

Moving a successful business such as yours to a vacant property and signing a strong lease is a terrific way to add value to a property. I've seen many opportunistic business owners realise some great returns both as an investor (picking up capital gains) and as a business (being able to secure a long-term lease in a property suited to their business).

So, to buy or rent is not the question to ask. Start with where is the best possible location for my business to thrive and go from there.

If you are considering purchasing a commercial property, I highly recommend you read Paul's Money Series in the context of asset allocation, and how putting more "eggs in the basket" of your business fits with your broader wealth strategy.

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