Commercial renting vs buying? Is it a stupid idea?

[KatyMac]

I have been looking at buying an ex-chapel to open my nursery in

But this week another ex-chapel is potentially available

This would be valued and I would pay a commercial rent (for say 5 yrs) - I would improve it then in 5 yrs if I am a success I could buy it (the new valuation would take in to consideration what I spent on it) & if I failed I would lose the money I invested & walk away

What do you think?

If you can afford to buy the freehold outright, then I think that would be the better option.

If things don't work out, you still have a freehold building to sell and have wasted money on rent.

You also do not have a Landlord to worry about (in terms of doing alterations etc.).

Whilst the valuation in 5 years time would take into consideration your improvements - it wouldn't necessarily cover the cost of them to you

have not wasted money on rent

But if I fail I can walk away - Oh I don't know

It would be very financially viable in the first few years

You also need to look at what the second chapel can offer that the first one doesn't, I know you were worried about the garden space in the first one and as you say gives you a chance to build up your clients and put some money away.

The second is bigger, the garden is much larger, in better knick (does that have a K?), needs about the same work on it - but I have that money in cash. It is in a better area with a wider catchment

I wouldn't have to borrow much (just an overdraft to cover monthly costs 'til we are up & running)

Just talked to DH and we have both agreed that if you have an option to buy later on then lease now and wait until things have settled down in the financial market.

If you go down that option, check your lease aswell that everything for the future is covered so that the owners cannot say oh, good an ongoing business, thank you very much, we have taken the option away, won't renew your lease and run it ourselves.

You do it up and then if you want to buy later they re-value it and persumably you'd have to pay more becuase you'd improved it? That doesnt sound fair.

Say it's 200 now I spend 50 (which is 20% of new value)

We sel it for 300 - but thay can only sell it for 80% of the new value so 240?

I think (that's how my dad explained it)

They wouldn't be able to run it tbh (& I don't think they would do that)

The chances are you will be tied in for 5 years anyway so if it fails before then you'll have liability for the rent (and other expenses) until the end of the lease

Buying the freehold offers so much flexibility and the market is so low at the moment that the chances are the value will increase so you will either have to pay more for it in 5 years time or, if you buy it and things don't work out, you'll have the increase in capital when you sell it.

It would be a no brainer for me in the current market

It is raising the commercial mortgage that worries me

It's scarey