Buying your business premises

For your customers or clients, your premises are your company. It means that moving can be a dangerous step - especially if you are already in a location that is ideal for your business.

But what if you are concerned about the cost or insecurity of renting?  Buying your premises from the landlord might provide the solution. It is a big step and a large financial commitment - but there could be some sound reasons to buy the premises you currently work from.

Work from the ideal location

If you are in retail, a shop on the high street with plenty of passing trade can be vital. If you are in transport, you need a depot close to major roads and probably a warehouse. If you have an office-based business, a prestige location may be important.

If you already have the ideal location for your business, moving could be a step backwards that increases the challenges. Buying your premises could ensure you can continue to benefit from the perfect location for as long as you wish.

Retain your customer base

Whether you work from an office, factory, workshop, warehouse or depot, and especially if you run a shop or other retail or customer service business, your customer base identifies your business with the location. It is where they expect to find you. Moving can mean a huge disruption, and you can never be sure that your customers will move with you - especially if a competitor takes over your old premises. Retaining your premises means that the goodwill you have built up can carry on working for you - not be put at risk.

Invest in your business - not the landlord’s

When you rent your premises, it means an ongoing cost. Buying is an investment in your own business, so it can help you acquire what should be an appreciating asset for the future.  

You can:

• Profit from the building when you sell it - when it should have also gained in value
• Let part of the property out to create another income stream
• Use the property as security to raise additional funding
• Sell the property with your business, greatly increasing the amount you can ask

Install the facilities you need

Buying a property gives you complete freedom to use and alter as you wish, subject only to planning regulations. You will be responsible for the management or repair of the building, but you can budget for maintenance to suit your business cycle, not the landlord’s priorities. What’s more, if you want to make changes to the property to suit your business - extend, demolish an outbuilding to create more parking, or build new facilities, you can. You can make your premises ideal for your business, rather than compromise what you do, based on the limits they impose.

Get in control of costs

With a lease, you are at the mercy of your landlord when it comes to rent increases. Many businesses face unpredictable - and frequent - rent increases that eat into their profitability.

If you buy, your costs will be entirely predictable. Even if there are increases in lending rates, they are likely to be more affordable than those of a commercial landlord, who must generate profit as well as cover capital costs.

At Rangewell, we have found that we can often arrange a Commercial Mortgage to help business owners buy out premises with costs comparable to - or even less than - the amount they are spending in monthly or quarterly rent.

How easy is it to buy your premises?

It is not always possible to buy premises that you rent, especially if they are part of a large estate. However, commercial landlords are businesses and it may be possible to make an offer that they find acceptable. After initial discussions to see if this is the case, you will need to assemble a professional team, with your solicitor, a surveyor and accountant ready to offer support during negotiations.

Like buying a residential property, you will need to arrange searches and ensure that the transaction can be arranged without problems.

You will also need to look at the costs. The cost of buying your business premises will depend on many factors, including:

• The type of premises
• The location
• The facilities
• The size
• Where in the country you are based
• Local demand

To understand the type of costs you are likely to face buying the premises your business works from, you should look at the prices of similar properties in your area. Local commercial property agents should be able to give you an indication of comparative costs, based on square footage.

If you are satisfied that the price is fair, you can then make a conditional offer to the landlord yourself - or use a local agent.

You should stipulate conditions for the offer, such as the property passing all relevant inspections and searches. Expect to negotiate.

What kinds of Property Loans are there?

Whatever your plans, getting the most cost-effective funding is key to your successfully acquiring your premises.

A Commercial Mortgage is one of the most common forms of finance used to buy commercial property.

These operate much like a residential mortgage, with the loan secured on the property itself.

Commercial Mortgages will let you spread the purchase price over 15 years or more and, as with a residential mortgage, the premises will be at risk if you are unable to keep up your repayments.

The main difference from a residential mortgage is that the rates and terms for a Commercial Mortgage are arranged on an individual basis. Lenders will look at your business, your accounts and projections to ensure that it has a future, and set interest rates based on the level of risk they believe it presents.

A sound business in a growing sector could expect to secure the best rates and terms and, as an owner-occupier, you may be able to get a loan-to-value of around 80%.

You may also be able to choose between a repayment mortgage option where you pay the capital and interest back each month or an interest-only mortgage, where you only pay the interest. If you choose this option, the lender will seek evidence of an appropriate investment policy that will cover the outstanding capital at the end of the loan term.

Bridging Finance can provide short-term finance. It is a solution often used by property developers and investors as a quick way to finance the purchase of a property. It works like a mortgage, in that the funding is secured on the property but, unlike a mortgage, Bridging Finance may mean high costs. It is best thought of as the means to bridge a funding gap until a more suitable long-term solution can be provided.

Bridging Finance could help you acquire your premises if a deal must be arranged quickly.

Solutions also exist if you are already currently buying your premises, and want to reduce your costs. You do not need to have paid off your current mortgage to arrange a new one. Your property will probably have appreciated in value, meaning that you can get a better deal on your existing loan. So if you want to reduce the monthly repayments on your current mortgage, and cut the demand on your cashflow Property remortgaging or refinancing may be the solution.

Commercial property solutions from Rangewell

Commercial property involves high costs, and it is important to have expert help to get the kind of funding that will help you reduce your outgoings.

Even a fraction of a percentage point can make a substantial difference to what you actually pay, while fees can mean additional hidden costs.

That's why it is vital to get expert help from the Rangewell team of property experts. We know the lenders, and we can use our expertise to identify the deal that really is the most appropriate. From land purchase finance to property and bridging, our knowledge can help you secure the funding you need when you want to buy your premises - and save you a great deal of cash.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.