Business Property – A Look At The Advantages And Disadvantages Of Buying

Nearly every type of business needs a premise from which to operate – In the case of a small business it may be possible to work from home however as most things do eventually grow and expand, it may be necessary to obtain larger working facilities.

The majority of businesses will require their own premises and are generally faced with the option of either renting or buying. The obvious choice for many would be to buy, finance allowing however there are advantages and disadvantages to both sides.

Advantages Of Buying

Retention of ownership – most businesses will need to take out a loan in order to purchase property. In the case of taking out a mortgage, the business is able to raise the capital without resorting to selling a share in the company, either to an interested party or by way of issuing shares. In this case the original owners will have retention of both ownership and control. The mortgage lender will have the right to charge interest on the loan amount outstanding however it will have no interest to a share in the business or its profits. The lender has an interest solely in the property and is only permitted to call in the loan in the event of borrower default.

Taxation – Businesses are permitted to make mortgage interest payments with pre-tax money that is deductible for tax purposes as expenses.

Cost and cash flow management – A commercial mortgage allows a business access to finance that would not usually be available. They can offer a degree of flexibility in designing a repayment scheme to suit the needs of the business, which may include fixing the repayments for a set period of time. Mortgage repayments tend to work out lower than rental payments and the borrower in this case will know what the payments will be in advance – this fixed payment can often aid the business with cash flow and managing costs. Businesses that rent a premise can be exposed to market conditions which could result in payment fluctuations on review.

Security of tenure – Businesses and individuals that rent have very few guarantees beyond the end of the current agreement.

Asset appreciation – This of course is by no means guaranteed however property has long been viewed by many as a very sound investment. The business or individual will have an asset which can potentially grow in value, just like residential property – this could subsequently increase the value of the business.

Financial flexibility – Taking out a loan by way of a mortgage to buy a business premises can free up money held in the business for other purposes. Borrowing money outside of a mortgage could prove to be more costly. It may also be possible to remortgage in order to raise finance in the future by using the available equity.

Retirement – Many people decide to hold property in a pension plan which can offer a tax-efficient way of buying the premises and boosting pension benefits.

Disadvantages Of Buying

Financial difficulty – Like any other mortgage, the mortgage lender will hold a legal charge over the property. Nearly all businesses meet financial difficulties at some stage which could potentially result in mortgage payments being missed. In the event of default the lender may take steps to repossess the property – if this happens then it would leave the business with nowhere to operate from.

Relocation – In the event a business needs to relocate, it is relatively easy to terminate a rental agreement. In the case of an owner occupier, the process is of course far more complex.

Flexibility – A business that rents has a far greater amount of flexibility that a business that is tied to a mortgage. Buying would only make sense if the business is confident over its future which encompasses two main factors – relocation & business expansion.

Drain on Capital – When it comes to getting a deposit, this can mean a huge drain on the business capital as this is usually taken from the profits or reserves.

Maintenance and upkeep – The owner of a property has management responsibilities that a tenant would not usually have – maintenance and upkeep of a property is a constant process and can prove to be very expensive.

Mobile Car Washing – Getting Appointments and Permission to Work on Business Properties

If you are considering launching a mobile car washing service business then you will most likely want to know where the best places to wash cars is and where the best customers hang out. Well, consider this; people who can afford car washes or the luxury of a mobile auto detailing service generally have income and that means the most likely they have a job. So, why not go to where they work to wash their cars?

Now then, not long ago, a gentleman from Kentucky, near Louisville who is considering going into the mobile auto detailing and car wash business asked me; “Is it easy to get permission to wash cars on a business properties?”

Well, it was always easy for our Blitz Marketing Teams, but after you do a 100 or so cities you have heard all the excuses, objections and defeat all their concerns ahead of time to put your future customers at ease. Now, I will say that each market is slightly different, one thing about the mindset in KY is that no one trusts new businesses until you have been in business awhile, once you are they will give you a try, which is a catch-22, because without clients you have no referrals and without business clients paying you, you cannot stay in business.

It’s very typical of KY and similar states, but, there are ways around that, such as joining the Chamber of Commerce, developing a community presence and proper PR and publicity for your mobile car washing company. This sure opens a lot of doors when getting permission to wash on business properties. Of course, the gentleman wishing to start the business also want to know; “Do you set up appointments to wash their cars at a certain time?”

Yes, you need to have your customers on a periodic schedule, ALWAYS, if you let people schedule you one at a time, you will get killed in fuel costs, traffic (Louisville FWY, downtown and suburbs can be a real bitch at times) and idle labor during drive times between clients. So, it behooves the mobile car wash operator to get permission to wash on various business properties from those owners and to schedule their routes close together in order to make money.

The Wrong Way to Buy a New Business Property – How to Avoid Common Snags

It is often said that moving ranks up there with divorce and bereavement as one of the most stressful of human experiences, and yet there are times when it is unavoidable and so we clench our jaws and dive in. When it comes to moving your entire business to a new premises there is as much if not more stress involved due to the fact that we all spend more of our time at work than at home and therefore getting your new location wrong has a lot riding on it. Not to mention the fact that there are, unless you have a very large family or a very small business, usually a lot more personalities involved in the moving of a business.

So when you are also buying your new premises it is vital to get it right. It isn’t all stress of course, choosing a new home for your business can be very exciting and it often means that your business is doing well enough to warrant a workplace upgrade, but buying a new business premises is never a simple task, there is definitely a right way to do it that avoids the obvious pitfalls and conversely a very wrong way that will raise those stress levels through the roof.

If you have found somewhere that seems to suit your business needs; somewhere that is the right size, in the right area of town at the right price, there are several vital things that need to be considered before you make an offer.

Zoning Regulations.
Local zoning regulations will determine whether or not your particular business type can trade in the area, pretty critical information to have. They also govern the type of signage you will be allowed to use, property access and parking. You may have found a location that you love, but if the location does not love your business, there is little point in buying. Very costly mistakes have been made by traders in the past who have bought a business premises only to discover that their business type is not allowed to operate out of it or that they cannot erect a sign on the outside of the property. Do not underestimate the problems that having no customer parking will bring either.

Just as with buying a domestic dwelling it is important to get things thoroughly checked out before you commit to purchase. Mortgage lenders will probably demand some sort of building inspection in order to grant funds, but even if they only require the most basic of checks it is prudent with a business property to get a specialist survey; if you are going to be housing a staff there or inviting customers to visit, you will need to ensure for insurance purposes that you have confirmed the building’s safety. It may be the case that your business requires certain activities to take place, in which case a survey designed to declare the building fit-for-purpose will need to be carried out. Finding out that your business property has structural faults is very different from finding out the same about a domestic dwelling; anything that delays you being able to trade is money down the toilet; having to fix things before you move in could mean expensive rent being paid along side a new mortgage or a homeless business that has to keep its doors closed until it has somewhere to work from, all of which can be extremely costly, indeed many businesses have failed waiting for essential building work to be completed.

Putting any excitement about a new business premises firmly aside and remembering that it is a professional undertaking will hopefully remind you to focus on your ‘due diligence’ and not to get carried away with the thrill of things new. Providing you leave no stone unturned you should be able to avoid the sort of costly pitfall that will leave you wishing you’d stayed where you were.