While there may have been a 'blip' in the last decade due to the global slowdown, it remains the case that property is a good investment and can be expected to perform well from a historical perspective. You may be aware of this and are thinking about buying a commercial property to add to your growing portfolio. However, you do need to carefully consider your position and determine your business model before you proceed. The decisions now may have a significant bearing on your actual return, so what do you need to think about?
Many Choices Ahead
You may be focused on the purchase price and consider that you are picking up a bargain with your target acquisition. However, do you have a clear picture for the future? You may intend to lease the property to try and get some consistent income, and you are quite happy because there is already a tenant in place.
Is an Existing Tenant a Good Thing?
If so, you need to look closely at the tenancy agreement to see when the lease expires and if there are any options for that current tenant to renew. They may be enjoying a relatively low rent from a market perspective, and perhaps this has been grandfathered in to the agreement during their tenancy.
This leads to a lot more questions, such as your ability to raise the rent at any time and, in particular, whether the existing business has any options to renew under the same conditions. Don't forget to look closely at other obligations such as rates, water costs and levies to a body corporate, as these may end up being your responsibility (and not the tenant's) when you sign on the dotted line.
Crimping Your Plans?
On the other hand, the property in question may be empty, and you may intend to set up your own operation within its walls. In this case, you need to be careful when you are entering into the transaction so that you achieve the best tax position.
You may have to set up a separate entity simply to purchase the property. Some people have two different companies in this case, one of which buys the business and the other one runs it.
Once you've determined this approach, then you need to see if there are any restrictions issued by the local authority or a body corporate that may stop you from expanding your operation as you may want.
Asking the Experts
There are many questions to be asked before you sign any contract. Consequently, you need to lean on your conveyancer to help you understand all the repercussions well in advance. Contact conveyancing solicitors to learn more about purchasing property.Share
31 August 2018
When you are a small company it can be a little scary to enter into business relationships with much larger companies. Larger companies have a lot more resources to protect themselves if there is a dispute. That's why it's important to have a smart lawyer on your side to help you draft the most watertight agreements possible. This blog has some tips that I have picked up over the years on how to make sure that you are legally protected when dealing with big companies, as well as some tips on how to choose a great business lawyer for your business.