Considering buying your own commercial business premises? As exciting as this is, there are many key factors to consider and decide upon before making your final decision.
Taking into account the basics such as size, location and facilities of the business premises, other factors to consider could be:
• Are you planning on buying your business premises through your self-managed super or more traditional means
– or even pay cash?
• What tax advantages and estimated deductions will you be eligible for?
• Will you operate your own business from it, or are you thinking of buying business premises to rent out to tenants?
• And of course my favourite question I always ask myself and my clients which is; "Why am I doing this?"
Additionally, if this is the first time you've ever bought business premises, you'll have everyone from family and friends giving you advice on what to do as well.
Now I love my family and friends, however none have experience in the field of accounting or buying business premises. While I appreciate their input, it's always best to seek advice from those who have a proven track record in these areas.
Plus you'll also have that little voice inside your head asking, "is it better to buy and pay off my own my business premises, or keep renting my business premises?" Because don't think for a second that buying your own business premises is the same as buying a house. It isn't.
While we all want return on investment from our residential or commercial property purchases, purchasing your own business premises and purchasing your residential home are two different things as they both have different criteria, purposes and outcomes.
So what is the value of owning your business premises?
1. Security – Many business owners value owning their own business premises for the simple fact it gives them, and their business, security. They can plan for the future as they don't have to answer to a landlord - or have the unexpected and added expenses of a landlord giving them one month to vacate because the property has been sold.
2. It is an investment – Another value in owning your own commercial business premises is it is your investment. You're not paying off someone else's mortgage, which is what you're doing when you're renting. And subject to how the commercial purchase and finance is set up, after a period of time you may be able to use that equity in your business premises to fund the purchase of additional commercial properties, businesses or equipment.
3. Slow down the roller coaster cash flow ride –
In business cash flow is king! So with your own business premises
you'll slow down the roller coaster cash flow ride.
You'll know exactly what your repayments are each month, instead of being at the mercy of rent increases and other rising outgoing costs which many landlords may charge you for.
4. Loans are better than leases – Similar to the last point, getting a mortgage loan might be more financially viable than signing a lease. The payments probably won't be too different, depending on what kind of financing you have, which means that for similar money you're given peace of mind of a stable repayment figure for a longer term situation than a lease period.
5. It is yours, you own it – Want to put in or remove walls, create more storage space, change the interior or add exterior signage and much more? When leasing or renting your business premises, getting permission from your landlord to put up signage or make any changes either externally or internally can be a time consuming, frustrating exercise for too many reasons to mention here.
If you own your own business premises you have the advantage and freedom to make any renovations internally and externally without having to request permission from anyone.
6. Owning business premises is an asset – Over time and in most cases, the value of the commercial business premises you own will increase. So you'll have an asset that will increase the value of your business and your personal net worth - subject to how the finance for your business premises purchased was structured.
7. Tax advantages of owning business premises – Whether you are leasing out the business premises you own, or operating your own business from your premises there are many tax advantages and deductions you may be eligible for.
As to the number of tax deductions you can claim these will vary as to…
• How the finance or loan for your business premises is structured
• How your business, trust or company is structured
• Whether you have brought your business premises through your self-managed super fund (SMSF) or not.
In fact, statistics from the Australian Tax Office that featured in the Sydney Morning Herald in 2014 show that approx. $54 billion is invested through SMSF in non-residential property.
Furthermore if you'd like more specific advice on whether you can buy your own business premises through a self-managed super fund please email us at Murray Nankivell firstname.lastname@example.org or phone us on (08) 8752 1300.
Of course, if you are renting your business premises you can still claim a variety of tax deductions, however probably not as much or as many as if you own your business premises.
When it comes to deciding upon the value of buying your own business premises there are many advantages. These include that you will not be paying off someone else's mortgage - you have more security, freedom and choices as a landlord cannot dictate to you what you can do and what you cannot do.
You'll also be building your investment portfolio, personal net worth, and be eligible to claim more tax benefits than you would if you were renting your business premises. I also haven't touched on the benefits of buying your own business premises and renting it out, so keep your eye for that in the future.
Want More Information About The Value Of Owning Your Business Premises?
Whether you have a question about buying your own business premises through your self-managed super fund or by more traditional financing, if you'd like more information please contact me and the team at Murray Nankivell on email@example.com or by phoning us on (08) 8752 1300.
About the Author - Matt Rowett