In Australia, we all love property, be it our home, unit at the beach, or investment property.
It’s no surprise then that many business owners also wonder about buying business premises to negate the need to rent.
Is this a good idea? Who does it make most sense for?
Here’s how we see it…
Buying business premises: key considerations
Commercial premises are a different beast to their residential cousins.
If you’re considering whether buying business premises is a good idea, it is advisable to consider the following three elements of your business:
What’s your growth plan for the business? How many employees will you need to meet your growth ambitions and does the premises you’re considering buying meet those ambitions?
The last thing you need is to own business premises that don’t meet your future needs.
Do you have the cash flow to be able to do the things you want in your business?
Buying your own business premises will tie up a significant portion of your borrowing capacity.
This may inhibit your growth plans for the business or other financial goals.
Who should own the property?
There are a number of options available to business owners, including family trust and self-managed superannuation funds (SMSFs).
- Trusts provide flexibility in how you use the property and allow you to borrow to redevelop, should the need or opportunity arise.
- SMSFs are becoming an increasingly popular structure for buying business premises because of changes to the law that allow self-manage superannuation funds to borrow to purchase investment assets.
The SMSF option allows business owners to access the equity within their fund to support their business.
It represents one of the very few opportunities that business owners have of utilising their superannuation for business purposes.
Need help deciding whether to buy business premises?
If you’re in the process of deciding whether or not you should buy your business premises and need guidance, contact your adviser to ensure that all the angles are covered.