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Q&A: 4 Considerations when buying business property

It’s important for us to understand both your business and the property you want to buy – after all, the business is the property.

That’s why we rely on specialists in the industry who can help our customers to understand the impact of challenges and market changes on their business. 

Do your research

What should business owners consider when looking to purchase a property?

Before seeking finance for your commercial property, first conduct your research. If you’re looking to buy as an investor, determine what the average purchase price is for that specific area to make sure you’re paying a market-related price.

If you are considering buying an investment property, then take into account the rental rates for the area.

The risk you may face, if you are uncertain of market-related purchase prices or rental rates, is that you may pay more than what you will earn, leading to future cash flow problems that can affect you.

It’s also important to evaluate potential developments that may have an impact – either positively or negatively – on the value of your property.

Our team of Commercial Property Finance specialists will be able to offer potential buyers insights into market trends and sales values, as well as factors influencing the appreciation or depreciation of values in an area, and other key considerations.

Consider the reason for purchasing property

What is the difference between owner-occupied and investment property?

When purchasing property, there are two options:

  • Owner-occupied properties
  • Investment properties

Owner-occupied properties are purchased by the owner with the intention to occupy and to trade from them.

With owner-occupied properties, the business owner is also looking to cap costs. By purchasing a property, the owner can limit rental escalations for the next 10 or 15 years, and secure tenure for the business.

When it comes to investment properties, buyers are looking for capital growth and income producing investments.

It’s important to distinguish between these two requirements and the reasons that drive the purchase.

When you approach the bank, our financing solution will be structured to suit your specific needs, as well as those of your business.

You can count on us as your commercial property partner.

Types of properties we finance:

  • Industrial
  • Retail
  • Offices
  • Factories
  • Warehouses
  • Workshops
  • Specialised Properties

Evaluate the upside and the downside

What are some of the cash flow considerations when buying a property?

It’s prudent to examine the downside of purchasing the property.

For instance, this may have an impact on the business’s cash flow as it could result in additional costs that you may not have factored in initially.

Consider whether the property may need renovations, refurbishments, or generators.

If you’re planning to rent offices to tenants, what impact will there be on your business if they leave? Remember that this is a long-term investment you will be making.

Understand the risks

What are some of the potential risks businesses may face?

Depending on the goods and services produced by your business, the property you buy may be used for various purposes, such as offices, commercial facilities, factories, or warehouses.

It’s important to conduct an evaluation of the building you buy for potential risks.

If, for example, you buy a warehouse that you want to turn into a manufacturing plant, you may need to have the building rewired in order to meet regulatory requirements.

Consult your insurer early in the buying process. Our team can conduct an infrared scan of the building, for example, to evaluate the asset first and ensure that there are no invisible problems such as poor wiring or rising damp.

Our approach is to always embed value in our customer offerings and invest time and expertise in finding the right solutions for you.

This means not only looking at the right solution fit, but also helping you to understand and contain your own business risks.


Next Step

Speak to one of our business bankers to find out more about how we can assist you with your commercial real estate requirements.