As a business owner, the decision of whether to rent or buy your premises is one of the most significant financial choices you’ll make. While renting may seem like the more straightforward option, purchasing your business premises can offer numerous benefits that go beyond just saving money. In fact, buying your own property can provide long-term financial security, give you greater control over your space, and even unlock new business opportunities. If you’re wondering whether now is the right time to purchase, here are several compelling reasons why buying your premises can be a great move for your business.
- Build Equity Instead of Paying Rent
One of the most compelling reasons for purchasing your business premises is the ability to build equity. When you rent, your monthly rent payments go to your landlord, and you don’t get anything back in return. Essentially, you’re helping someone else build wealth.
On the other hand, when you buy a property, each mortgage payment helps you build ownership of that asset. Over time, as the value of the property appreciates and you pay down your mortgage, you build equity in the property. This can be a valuable financial asset for your business, potentially allowing you to borrow against it for future expansion or investment.
Example:
If you’ve been renting for years, you may have already spent tens of thousands—or more—on rent. If you had been paying that money towards your mortgage, you could now own the space, rather than continuing to pay for something that offers no long-term benefit.
- Stability and Control Over Your Premises
As a business owner, having control over your space is crucial for ensuring long-term stability. Rent increases, changing lease terms, or the risk of being asked to vacate can create significant disruption to your operations and planning. By purchasing your premises, you secure a long-term base for your business without worrying about rent hikes or lease expiry.
This sense of stability can be especially important for growing businesses that require consistent operations and the ability to plan for the future. You’ll have the freedom to modify or expand the property to meet your needs without needing approval from a landlord, giving you more flexibility to adapt as your business grows.
Example:
In a rental situation, a landlord may decide not to renew your lease or may increase the rent substantially, making it difficult for you to plan ahead. When you own the property, you are in control of your lease terms, giving you the peace of mind that your premises will be there as your business continues to evolve.
- Potential for Long-Term Financial Gain
Owning property can be an excellent investment, especially if the value of the property appreciates over time. Real estate has historically been a sound investment, and business premises are no exception. The value of your property may rise as the local area develops, leading to capital gains when you decide to sell. Additionally, if you choose to buy in an up-and-coming area, your property could appreciate substantially as the neighbourhood becomes more desirable.
Even if property values don’t increase dramatically, owning a building is often less costly than paying rent over the long term, especially when you factor in inflation. After years of mortgage payments, you could own a building outright, meaning you’ll have lower overhead costs and an asset that could become a significant source of income or resale value in the future.
Example:
Let’s say your business premises were purchased for £300,000. After 10 or 20 years of mortgage payments, you could own the property outright. Meanwhile, the property might have appreciated in value, meaning it could be worth £500,000 or more when you decide to sell. That’s a potential £200,000 gain in addition to the benefits of reducing your monthly costs once the mortgage is paid off.
- Tax Benefits and Deductions
Purchasing business premises can bring with it significant tax advantages. Mortgage interest on your business property is typically tax-deductible, which can help reduce your taxable income and lower your overall tax burden. This deduction is one of the main reasons why many business owners choose to buy rather than rent.
Additionally, the capital costs of improving or maintaining the property may be deductible, depending on how the property is used for business. You may also be eligible for tax breaks or grants related to energy-efficient upgrades or sustainable building improvements, adding further value to your investment.
Example:
If your mortgage interest payments are significant, the tax deductions can make a big difference to your cash flow. For instance, if you pay £10,000 in mortgage interest annually and you’re in a 20% tax bracket, you could save £2,000 a year on your tax bill.
*Tax advice is fundamental to obtain and your tax position will be specific to your circumstances.
- Customise Your Space to Suit Your Business Needs
When you rent, you may be limited in terms of how much you can customise the space to meet your specific business needs. Landlords may have restrictions on what you can or cannot change, and any improvements you make are often lost once you leave the property.
When you own the property, however, you have complete control over how the space is designed, used, and altered. Whether you need to expand your premises, change the layout, or add specific equipment, the freedom to customise allows you to better adapt the space to your evolving business requirements.
Example:
If your business needs more office space or larger production areas, you can choose to remodel or expand your property without needing approval from a landlord. Plus, any money you spend on improvements is an investment in your own asset, not a rental property.
- Generate Additional Income Through Leasing or Renting
If your business only occupies part of the property, or if you outgrow your premises, you have the option of renting out space to other businesses. This can create an additional revenue stream and help offset your mortgage payments. Many business owners purchase properties with the intention of renting out excess space to other companies, turning their premises into a source of passive income.
Example:
If your business only occupies the ground floor of a larger property, you could lease the upper floors to other tenants, generating income to help cover your mortgage and other costs.
- Long-Term Asset for Future Generations
If you’re planning for the long-term future of your business, purchasing the premises can be a smart move in terms of legacy building. Owning your property means that, as the business grows, you have an asset that can be passed on to the next generation or sold to finance future business ventures. You also have the option of leasing or renting the property out once you retire or move on, which could provide a steady income for years to come.
Example:
You may choose to retire but keep the property as an income-generating asset. You could lease the property to a new tenant, generating rental income, or pass the business and the property down to your children or business partners.
Conclusion: The Case for Owning Your Business Premises
While purchasing your business premises involves a significant upfront investment, the long-term benefits make it an attractive option for many business owners. From building equity and enjoying stability, to tax advantages, customisation opportunities, and potential income generation, the advantages of owning your business premises far outweigh the challenges. If you’re in a position to buy, purchasing your property can provide a sense of security, control, and financial flexibility that renting simply can’t match.
If you’re considering purchasing your premises, it’s a good idea to consult with a financial advisor or commercial property expert who can guide you through the process and help ensure that it’s the right decision for your business.
