When considering whether to renovate an old property or buy something new for a bricks and mortar location for your business, it’s important to know what you’re getting yourself into and what each strategy looks like.
To renovate or buy new is a question many business owners face. Let’s consider the differences between renovating and buying a new property for your business.
Buying to renovate
You’ve seen the shows and heard the talk at the barbecue on the weekend on renovating. However, for every phenomenal story, there are horror stories of running out of money, problems with tradespeople, cost overruns, time delays, council issues and so on.
Planning is imperative when renovating, and your first step should be developing your property purchase strategy.
When working out how much you can afford, you’ll need to consider funding the deposit and renovations, as well as cash flow to make the mortgage repayments while you’re working on the property. You’ll need to determine just how much renovating you want to do.
Will you only carry out cosmetic enhancements, for example, paint and flooring? Or will you include structural elements, such as knocking out and rebuilding walls? The more work you do, the more cash you’ll need, the longer it will take and the greater the risk.
You should also consider who you’re competing with when you’re putting in an offer or bidding at an auction. Seasoned renovators or those in the building game can afford to pay more to acquire the property, and if you have to outbid them, you’re starting to eat into any prospective margin and increase your risk.
Renovators need to understand the cost of their time. One the most popular ways to renovate cost effectively is to do it yourself. However, if a professional can get it done faster, the extra cost may compensate.
You also have to consider the monetary cost of your time. If you’re going to take time away from your business, how much money will you lose?
While buying right is important when it came to renovating, doing research and buying right when you’re not planning to add value is vital.
When you’re looking to buy, you want to buy something that ticks all the boxes. You want it to be close to major infrastructure, and you want to be sure that the local population can sustain continued growth and have different industries providing local employment.
You also to consider the fear of buying something that isn’t complete and, therefore, not know exactly what you’re getting.
But many of these issues can be avoided with thorough research, expert legal advice, and by surrounding yourself with a professional team of builders, engineers, and bankers.
David Hancock is the director of Binnari Property.