Buying commercial premises is a big step for any company, but it’s one that more and more business owners are taking. Here are five benefits to owning a commercial property.
1. It can help the business to grow
For many business owners, buying a commercial property can give the company the boost it needs to blossom. In fact, a survey revealed that while 40 per cent of UK businesses which were between six and 10 years old still lease their premises, 70 per cent believe owning the property would encourage the business to grow. Buying bigger premises naturally makes expansion more physically possible, but the financial benefits can also spur growth.
2. It can make you money
So what are the financial benefits? Well for starters, interest payments on a commercial mortgage are tax deductible, but owning a commercial property could actually make you money. If you pay a fair price and make your purchase with the long-term in mind, it’s likely that the property will increase in value making it a potentially lucrative investment. You could also let out parts of the property to other businesses, providing you with an additional income stream.
3. It’s flexible…
If you buy a commercial property the building is yours to do with that you will, it’s as simple as that. Redevelop and redecorate to your heart’s content, change the layout, even extend the building if you have the space and can get permission – when you own the building you hold all the cards. You won’t have to wait for a landlord to carry out repairs, or wear your winter coat indoors because the central heating doesn’t go on until mid-December, and there’s no risk of a landlord disrupting your business with renovation work.
4…Yet predictable
Rent increases are a thing of the past when you own your own property which means you can forecast your costs with more certainty, particularly if you have a fixed-rate mortgage. Planning for the future is a lot easier when you know how much you’ll be spending each month, so a mortgage on a commercial property provides a strong basis on which to base your company’s financial decisions. Owning business premises also removes any worry about a landlord deciding not to extend your lease, while at the same time you aren’t tied to a fixed term contract so you can move when you choose.
5. You can use your pension
Pensions are often seen as ‘dead money’, but if you use a Self Invested Personal Pension (or Sipp) to help buy a commercial property, the tax benefits are considerable. The Sipp can borrow up to 50 per cent of its net asset value, and once the Sipp owns the premises it leases it back to the business. It means the business pays rent to into the pension, which goes back into your pension pot tax-free. You can’t use a SIPP to buy residential property, but by purchasing commercial premises you have the opportunity to use your company’s earning potential to boost your retirement savings.
If you would like to discuss this topic in more detail or discover how Key Mortgage Advice can assist with your mortgage application, please contact us on 01772 620 000 or email enquiries@keymortgageadvice.co.uk
