BUSINESS ANDHEADER FRANCHISING
R U O Y Y U B R TO RENT O S E S I M E R P S S BUSINE expand your premises and you might be tied into a rental agreement. Renting a business premises can be risky if the lease term comes to an end and you need to find a new location to operate from. Your cash flow can be affected if you need to locate to new premises or if there is an increase in your rental.
Buying premises
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ou’ve been in your current business premises for a few years and you’ve seen your establishment grow, but now you’re wondering if you have room to expand. Before taking the important decision of whether to purchase or rent your business premises, consider the pros and cons of both.
Renting premises Pros: Your landlord is responsible for the maintenance and management of the property – you won’t be stuck with an unexpected bill if the geyser bursts. There is a much smaller financial outlay with renting your business space and there is less financial risk involved than buying. Instead of paying off a monthly bond, you could invest that money into your business.
Cons: One of the biggest downsides to renting a property is that you are paying off someone else’s bond instead of your own. The landlord may also place restrictions on what your business may or may not do. Will these premises allow for growth in the years to come? You may need to 20
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Pros With South Africa’s current economy resulting in lower interest rates, now may be a good time to invest in your own premises. Owning your own premises creates business security as it is a long-term investment and an asset that can stand you in good stead into retirement. There is also no danger of being placed in the position of having to find new premises at the end of a lease term or the whim of a landlord. The premises can be customized for the needs of your business and, should you have more space than you currently require, you can rent let out extra space to another company which will add to your income.
Cons Property is both an asset and a risk as it involves massive expenditure. The initial outlay and bond repayments can put strain on a business as well as the need for upkeep and maintenance. Plus the deposit can be up to 50% of the asking price. If there is an upward turn in the economy, you may be at the mercy of higher interest rates which will place strain on your cash flow and be forced to sell. Can you afford the expense of buying premises and do you have insight into your company’s future, your growth and projected expenditure?
THINGS TO CONSIDER WHEN BUYING BUSINESS PREMISES: How much do you really know about the property? It might have a beautiful view and a pretty red roof, but you need to know more and have it professionally inspected before you purchase it to ensure that it is structurally sound, that you are aware of any issues, such as damp, hidden defects or damage and to confirm that the state of the wiring, plumbing, air-conditioning and heating systems are in a reasonable state. This could save you making a poor decision or having to outlay large sums in repairs. Have you got enough money? It is best to have a deposit available when applying for a bond as many financial institutions may not approve a 100% loan. Find out if you prequalify for a bond by visiting www.ooba.co.za/apply-homeloan/prequalify. Make sure you have sufficient funds available to cover the transfer fees and the bond registration. Also make sure you have an emergency fund for any unforeseen expenses. For an online calculator to help predict what you will be paying, visit www.ooba.co.za/calculators/ bond-and-transfer-costscalculator. Are you investing in a secure area? Is the building safe from crooks? Investigate the security of the premises Make sure the premises are properly secured and consider getting a security contract with armed response from ADT – visit www.adt.co.za – or Blue Security – visit www. bluesecurity.co.za.
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