Decision Making 101 – Part Two: When Is It a Good Idea to Buy a Property?
So today we’re going to talk about the pros and cons of buying a property, so you’ll have a better idea of whether it’s the right option for you and your business. The next post in the series we’re going to do the same thing, only our topic will be leasing.
Let’s get started. Buying can be a great option for the right business and business owner, but it doesn’t work for everyone. Here are some factors that would indicate buying may be right for you:
You’ve been in business, successfully, in the same area for ten years or longer.
Your business is a franchise of a nationally-known brand in a hot market.
Your business requires a free-standing building and extensive remodeling or rebuilding to meet your needs.
Property values in the area are expected to increase dramatically, making the purchase a good investment.
You have enough cash to purchase the building outright, or can easily obtain financing (this reason should also be combined with the one above; you need to make sure the property is also a good investment and can be resold when you are ready to recover your capital and even make a profit).
Pros and Cons
Keep in mind, there are “down” sides to every situation. Here are a few of the most important “pros” and “cons” to consider before deciding to purchase a property.
Purchasing a property can be a good investment.
You can try to sell the property if you need to.
If the property is large enough, you can sell parcels.
You can leverage the equity in the property and obtain additional financing.
In the event of a catastrophe or disaster, insurance may not be enough to rebuild.
You may be unable to sell property the and recover some or all of your investment.
It can take a great deal of capital.
That’s a lot to consider, so think it through. In the next article we’ll tackle leasing in the same way, in Decision Making 101: Part Three.