Commercial Property – Does it pay to own?
Buying vs Leasing Commercial Property
Commercial Property for sale Brisbane
You need premises to set your office up and from which to do business, but do you calculate the difference between renting it and owning it – financial benefits considered?
The decision about whether to buy or lease a commercial property is far more complex than buying a house. You have to consider everything that will have an impact on your business.
At this stage, it is advisable to seek professional business advice. Accountants, solicitors and other business advisers can advise whether it’s in your best interests to buy or lease your business premises and equipment as well as the tax implications of each option.
Here are a few pros and cons we gathered for both buying and leasing a commercial property to help you know more.
The benefits of buying your commercial property:
It’s yours and you own it. It’s as simple as that. Want to change the internal layout? No worries. Got the space to extend the building? Go right ahead. Buy a property and you hold all the cards when it comes to deciding how best to manage the site.
You can sell it
Just like residential property, your commercial premises will potentially be growing in value while you operate your business from it. Commercial property is booming in some cities, and the right property can be a lucrative investment. On the flipside, if things take an unfortunate turn, it’s an asset you can sell if you suddenly need that money.
Your commercial premises will potentially be growing in value while you operate business within it.
Types of business premises:
- Warehouse, Manufacturing plant or storage facility
- Retail premises
- Home office, typically used by home-based businesses
- Shared commercial office or hub
- Temporary premises, such as a market stall or pop-up business
Planning for the future is a lot easier when you know exactly how much you’ll be spending each month, and a mortgage on a commercial property provides a strong basis on which to base your business’ financial decisions.
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Cons of buying:
Commercial property doesn’t come cheap, depending on demand and location. Finance/Lending may be tougher than residential loans. In most cases you need to put up far more deposit – anywhere from 25 to 50%, depending on who you are and how much money/assets you have behind you.
In most cases, you may need to put up a bigger deposit.
Lack of flexibility
If your business really takes off, chances are you’ll quickly outgrow a property that seemed perfectly adequate just months ago. If you’re locked into a mortgage, you may not be in a position to move anytime soon, limiting your ability to grow your operation until you can sell and find something bigger.
Remember that extension and the changes to the internal layout? Guess who’s paying for those? Maintenance costs on a commercial property, particularly an older one, can be considerable, plus there are council rates and other annual costs to consider. Having large sums invested in one building can limit other investment opportunity, depending on your financial affairs.
Your money, your choice
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Cons of Rent:
Buy a property and your expenses are more or less set. But leasing means your rent is almost guaranteed to increase in line with CPI each year, as well as attracting further premiums when it comes time to renew the lease and the landlord ups the cost.
Lack of control
Running a business is hard enough without someone else’s decisions directly influencing your ability to manage your own affairs. If your landlord decides to sell the property, chances are you’ll have to move to a new one, which can not only be expensive in the short term but may also impact your customer base and hurt your bottom line.
You’re paying someone else’s mortgage
Rent on commercial properties ranges anywhere from just a few hundred dollars a month to hundreds of thousands annually. But whatever the cost, it’s a lot of money to be forking out to help someone else pay off his or her property. Something you do not want to do if you can afford the other option.
ATO and Commercial Property:
TAX & Buying commercial premises
When you buy or otherwise obtain a commercial property – such as a shop, factory or office – it’s important to keep records right from the start.
Commercial properties used in the running of a business are subject to capital gains tax. You’ll need records of the date and costs of obtaining the premises so that you can work out your capital gain (or capital loss) when you sell it.
Income tax deductions
If your property is used to run a business or is available to rent for that purpose, you can claim tax deductions for expenses associated with owning it, such as interest on a loan to buy the property and maintenance expenses. Keep records of your expenses from the start, so you can claim everything you’re entitled to.
If you buy commercial premises, you may be eligible to claim a credit for the GST included in the purchase price.
You may also be able to claim GST on other expenses that relate to buying the property – such as the GST included in solicitors’ fees and on-going running expenses.
You can’t claim GST credits if:
the seller used the margin scheme to work out the GST included in the price
you purchase property from someone who is not registered or required to be registered for GST
you purchase the property as a GST-free supply, or
you’re not registered for GST.
Commercial property for sale Brisbane – Blocksidge & Ferguson Commercial Agent details:
Commercial Property Management
144 Adelaide Street
Brisbane QLD 4000
T: 07 3233 3933
F: 07 3229 5636
Commercial Sales & Leasing
144 Adelaide Street
Brisbane QLD 4000
T: 07 3233 3966
F: 07 3229 5636