Commercial mortgages might not be easy to come by during a credit crunch, but that’s not to say they’re impossible. With reduced property values you might find that a recession is actually the best time to make the switch from leasing to buying. As with any property purchase, you need to think of it as a long term investment.
You also need to consider whether it’s a building you can stick with long-term. The advantage of leasing is the obvious flexibility that goes with it. As a new or small business, you may find that your requirements for space are constantly changing so it’s important to be sure you’re not buying a property that won’t fit your needs in a year’s time.
However, if you are in a position to buy then there are obvious advantages. Firstly, you won’t be subject to unexpected service or landlord charges as you’ll own the property. Secondly, you can rent out any space you don’t need to other businesses, which could provide a nice bit of extra income. However, some lenders may prohibit you from letting out space so it’s important to check the terms of your mortgage if you plan to do this.
A big advantage of owning your property rather than renting is a greater degree of predictability with regards to monthly costs. With a fixed rate mortgage you’ll know exactly what you have to repay each month and won’t be subject to rent increases imposed by landlords. However, if your rate is variable you will be at the mercy of interest rate changes and it’s important to bear in mind that while your business may be able to afford a loan at 5-6%, it could be a different story at 8-9%.