Be the landlord and the boss
The appeal of being your own boss is one of the main drivers for starting a business. But being your own landlord can also be appealing – and rewarding.
If you’re currently leasing your premises and your business is in a sound financial position, owning your own premises could be a good option. But first, consider these pros and cons.
The pros
Building wealth
There are many potential benefits of owning your own commercial property. From a personal perspective, it can be an effective way to build wealth with the potential for the property to rise in value.
Certainty, control, and freedom
From a business perspective, owning your own premises gives you more decision-making power. With no landlord to deal with, there’s no worrying about whether your lease will be renewed. How the building is operated and maintained, and how it’s kitted out, is up to you.
New opportunities
There’s another benefit to owning your own premises that can be even more important in the long-term. According to ANZ’s Director of Sector Strategies Richard Hinchliffe, it can open up new strategic options, such as ways to expand your business or enable better customer service.
“For example, one of our customers who supplies recycled parts to a range of customers were looking to expand. But to do so they needed a large industrial site, which can be hard to find in this sector.
“To enable their expansion plans, we helped them fund the purchase of a large second site, which meant they could hold a much wider range of products and serve a significant number of new customers. It also gave them the ability to manage more throughput, and effectively doubled the size of their business,” says Hinchliffe.
The cons
Owning your own premises isn’t for everyone. Purchasing a commercial property soaks up capital you may need to establish and grow your business – particularly if it’s just getting started.
While dealing with a landlord can sometimes be a hassle, landlords are responsible for ongoing maintenance and all the associated costs such as compliance and insurance.
And while property prices tend to go up over the long term, they can also go down. As a landlord, you take the risk. With leased premises you also have more flexibility to move if your situation changes.
Both buying and leasing
It doesn’t have to be one or the other. Buying a commercial property to add to your portfolio of existing leased premises can also be a good option.
“We helped fund another customer into a second site across the city from their rented premises,” says ANZ's Richard Hinchliffe. “That not only allowed them to service a wider geographical area and grow their business, it also meant they were able to reduce travel times and stock movements.
“A spin-off benefit was that many staff were able to reduce their daily commuting time. And with two locations, they have a wider pool of potential staff, which makes it easier for the business to attract and retain high quality people.”
Weighing up the pros and cons
The decision on whether owning your own premises is appropriate depends on many different factors. After all, every business – and every business owner – is different.
When weighing up the pros and cons, think about things like the strength of your business, how much capital you have available, and whether a commercial property purchase is the best use for it. Most importantly, think about how it fits with your business strategy and your own personal goals.
Purchasing commercial property is not without its risks. But if the business case stacks up, and there’s a good fit with your longer-term objectives, owning your own premises can be a great way to build wealth and grow your business.
Talk about it
It’s important to get good advice, so talk to your network of business advisers before making a decision.
At ANZ, we can help you understand the financial aspects. Talk to one of our business specialists about how we could help.
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