Do I Need a Commercial Mortgage?
If you’re looking for a new premises for your business, whether it’s an office or a hotel, it’s classed as a commercial property. Purchasing a commercial property requires a commercial mortgage, which isn’t always easy to obtain. This is why people who aren’t eligible for a commercial mortgage or don’t want a large financial commitment can choose to rent a business property instead.
If you need a commercial property it’s important to weigh up the pros and cons of both renting and buying. It’s not quite as simple as buying or renting a house and there are other business concerns to consider.
What classes as a commercial property?
If you are trading within the building or using the property for any kind of business purpose, then it is a commercial property. Even if you live within the building (for example you buy aretail premises or pub with an owner’s flat above) it is still classed as a commercial property. Here are some of the most popular types of commercial property:
- Office
- Warehouse or factory
- Shops or retail units
- Pubs, bars and restaurants
- Hotels and B&Bs
- Farm buildings
- Nursing homes and private clinics
Buying VS Renting
If your business is expanding or you’re looking for your first office, you need to decide whether to buy or rent a property. Most small businesses start off renting a space until they establish their turnover and know what they can afford when applying for a commercial mortgage. Here are some advantages and disadvantages of renting:
Renting pros
- Minimum deposit required compared to a large cash sum
- Easier to relocate or upscale/downscale as needed
- No maintenance costs
Renting cons
- Your landlord could increase the rent, affecting cashflow
- You might not be able to adapt the property if needed
- You will never own the property as a business asset
Some businesses rent a premises as a stepping stone before buying a commercial property, while others simply prefer to rent long term. Many businesses only require a small office or studio, for example, which is easier to rent. However if you’re thinking of buying here are the pros and cons:
Buying pros
- You know your monthly payments – not dictated by landlord
- You own the building so can make whatever changes you like
- The property could increase in value
Buying cons
- You’ll need a large deposit
- You’ll be responsible for maintenance costs
- More difficult to relocate
If you’d like to find out more about commercial mortgages, get in touch with our commercial mortgage brokers.
