Commercial Mortgages – The Things to Consider

When any business owner makes business expansion plans, the requirement of a new commercial property is often encountered. For most businesses, the cost of commercial space is a major factor. There are mainly two ways to acquire commercial property for doing business – rental or owned by taking a mortgage. These two ways can play out very differently, especially in the long term. Hence, there are a few things to consider when getting a commercial mortgage or rental commercial property.

Rental property leaves you fewer responsibilities at long-term higher cost

When you rent a commercial property, you have fewer things to worry about. The building condition, maintenance, appropriate licenses and permits, property taxes etc. are not your problem. The landlord takes care of all these aspects. You just get a monthly rental bill which included everything, and as long you pay that, you don’t have to worry about anything else. This can be sometimes useful for small startups who would like to keep their operations simple and responsibilities to a minimum. However, this is often the more expensive option since the landlord also needs to make a profit after covering all the costs. This adds up in the long term. Hence, this may not be always suitable for long-term plans.

You take more risks with a commercial mortgage, with many potential benefits

If you take a commercial mortgage and decide to buy the commercial property you need, you are essentially investing your money into the commercial property. If the value depreciates, then you lose some of your investment. However, if the value increases, you stand to gain. You can choose the term of your repayment and adjust the instalment according to your convenience. If you choose a longer term, you have to pay a higher interest, which may be variable according to market rates. The commercial mortgage also creates a large liability for your business. You cannot walk away from your property as easily as you walk away from a rental property. You must weigh the risk of the liability becoming a large burden on your ability to effectively manage and grow your business.