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An option to consider for your business is to buy a building or land through a commercial mortgage. Its terms are flexible, and it makes the most sense when considering cash flow. You can also consider this option when taking over an existing business, and developing properties as investments. One thing to keep in mind is that the lender has a legal claim over the property until it is fully paid. This should not be a problem as long as the borrower is true to their end of the agreement.
1. With permission from the lender, a business is able to sublet spaces to other businesses. Depending on the number of rooms in the building and permission of the owner, subletting space to others can reduce mortgage payments. Sublet enough spaces, and it may completely offset mortgage payments all together.
2. Unlike renting, the interest paid on a commercial mortgage is tax deductible.
3. As previously mentioned, free space may be sublet.
4. If the value of the property increases, it makes your property more valuable.
5. Mortgage payments will more than likely be similar to a rent payment. Unlike rental payments, commercial mortgages offer a tax benefit.
1. If you're currently having a cash flow problem, the substantial deposit necessary could put a strain on your business budget.
2. The substantial deposit could be used for other business expenses.
3. Responsible for maintaining the property. When you rent property, if something goes wrong, it's the owners responsibility to fix it. Not so when purchasing-- the responsibility goes to the buyer.
4. Harder to relocate the business. If you're considering moving your business in the future, commercial mortgages may not be the route for your business. Depending on the economical climate of your region, selling property could be difficult.
5. Just as an increased value of property makes your investment worth more, the converse is also true-- if the value of land and/or property in the region decreases, so does your value of your investment.
As in any investment, purchasing land or buildings for commercial purposes, business owners need to consider the location of the property, if the business plans to relocate, and their cash flow when making a decision.