Should You Buy a Business that has a Property as Part of the Sale?

Insights | Should You Buy a Business that has a Property as Part of the Sale?
A reception of an office space

Buying a business that includes a property can have its advantages and disadvantages. 

On one hand, it can provide stability and a fixed asset for your new business to operate from, whilst on the other hand, it can also come with additional costs and complexities. 

In this blog, we will explore the benefits and disadvantages of buying a business that also has a property, as well as the options available on what to do with the property in the UK.

Benefits of Buying a Business with a Property

  1. Stability and Control

One of the primary benefits of buying a business that includes a property is that you have a fixed location from which to operate. This provides stability and control over the business’s operations and ensures that you have a permanent base from which to serve customers. 

Additionally, owning the property can provide long-term cost savings compared to leasing or renting a property.

  1. Potential for Additional Revenue Streams

If the property includes additional space, such as rental units or commercial space, it can provide an additional source of revenue for the business. This can help diversify the business’s income streams and increase profitability.

  1. Potential for Appreciation in Value

Owning a property can provide a long-term investment opportunity, as property values generally appreciate over time. This can provide additional financial security and value to the business.

  1. To Raise Finance to Fund the Business Acquisition

If you do not have enough cash to buy a business, and it has unencumbered property, you could probably raise 80% of the value of the property to help to pay for the business.

Disadvantages of Buying a Business with a Property

  1. Additional Costs and Responsibilities

Owning a property comes with additional costs and responsibilities, such as property taxes, insurance, maintenance, and repairs. This can add significant expenses to the business’s operations and require additional time and resources to manage.

  1. Limited Flexibility

Owning a property can limit the flexibility of the business, as it may be difficult or costly to move to a new location if the business needs change. This can also limit the ability to take advantage of new opportunities or adjust to changes in the market.

  1. Property Values Fluctuate

Whilst property values generally appreciate over time, there can be fluctuations in value that can impact the business’s financial stability. This can make it difficult to plan for the long-term and may require additional financial planning and management.

Options Available for What to Do with the Property

If you have purchased a business with a property, there are several options available for what to do with the property.

  1. Continue to Operate the Business from the Property

One option is to continue operating the business from the property. This provides stability and control over the business’s operations and ensures that you have a permanent base from which to serve customers. However, it also requires ongoing maintenance and expenses associated with the property.

  1. Rent Out the Property

If the property includes additional space, such as rental units or commercial space, you may choose to rent out the property to generate additional income. This can help diversify the business’s income streams and increase profitability. However, it also requires additional time and resources to manage and maintain the property.

  1. Sell the Property

If you do not want to continue owning and managing the property, you may choose to sell it. This can provide a source of capital to invest in the business or other opportunities. However, it also means losing the stability and control that comes with owning a fixed location.

  1. Convert the Property

If the property is no longer suitable for the business’s operations, you may choose to convert it into a different use, such as residential or commercial space. This can provide a new source of revenue and can help diversify the business’s income streams. However, it also requires significant investment and may take time to generate a return on investment.

Conclusion

Buying a business that includes a property can have its advantages and disadvantages. 

Whilst it provides stability and control over the business’s operations and potential for additional revenue streams, it also comes with additional costs and responsibilities

Further reading…

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