Saturday

South Africa - 13 tips on Lease or Buy Property? - by Willem Tait

Should you lease or buy commercial property?


We all know that owning property (an asset) is better than leasing, but when compared to the operational requirements of your business, the answer is not clear cut. I have listed some of the advantages and disadvantages for your consideration.

Advantages of buying

1. Registered asset: The advantages of having a long term asset registered in your business allows for potential capital growth, TAX and VAT deductions

2. Income: Depending on the property you could lease a portion to another tenant and generate income.



3. Cost: Depending on how you structure your commercial bond, you could opt for a fixed monthly bond payment, giving your business clear and fixed costs.

4. Access to equity: You can use the property as a guarantee or surety in business dealings with clients, suppliers or partners and not rely on a cash loan from a bank.

Disadvantages of buying

1. Premature Sale: Your owned commercial space may become inadequate forcing a premature sale of the property.

2. Deposit required: Commercial bank finance is available at a 30% cash deposit and the balance is usually financed over 10 years as appose to a 20 year residential bond.

3. Maintenance and improvements: As the owner, you are responsible for maintaining the property and making your own improvements.

Advantages of leasing space

1. Location: Leasing space may give you access to a high image address that you cannot afford to buy.

2. Working Capital: For the first couple of years you will have access to more money i.e. not tied up in your 30% deposit and you can thus respond to more business opportunities in the market.

3. Focus: Leasing property should allow you to focus on your business and not the management of your property

Disadvantages of leasing space


1. Variable Costs: With a leasing option you may be subject to annual rent increases and higher costs at the time when your lease expires.

2. No Equity: While leasing you will be funding the investment of the landlord with your lease payments.

3. Control: Leasing property gives you limited control. Owning property gives you absolute control.

Luckily PropX can offer options specific to your requirements.

If you are in the market to lease, purchase or sell commercial property, kindly give me a call or join me for a cup of coffee at our Nelson Mandela Sandton Square offices.

Alternatively, welcome to Click Here and email us and we will gladly contact you.


Regards

Willem Tait - Director, PropX Invesco (Pty) Ltd Cell: 084 491 1123
Tel: (011) 881-5797


More about me

I am a property broker and CEO of PropX in South Africa, a commercial property consultancy. I’ve been in the game for the past 15 years, leasing and selling commercial space and can assist corporate tenants, buyers and sellers in finding, leasing and selling commercial property.

I also enjoy working with other property brokers and property professionals on a commission split basis in concluding transactions. Welcome to visit www.willemtait.com for more info on my company or email me willem@propx.co.za