Buying or Renting a Hairdressing Salon
If you are looking to open your own hairdressing salon, barber shop or beauty salon it is often worth buying your proposed hairdressing salon rather than renting it.
Advantages of Buying
The advantages of purchasing your hairdressing salon premises instead of renting them are that repayments on commercial mortgages can be cheaper than monthly rental payments in the short term and most certainly in the long-term as rents increase over time. Whereas monthly business mortgage payments increase or decrease with interest rates, unless you have opted for a fixed rate.
In time,15 years is a popular option, the mortgage will be repaid meaning there will be no more commercial mortgage repayments required, whereas if you are renting you will still be paying your monthly rental payment. The main advantage to owning over renting is that you have an asset that you can sell one day.
Advantages of Renting
Renting your hairdressing salon is also a good, and often the only, option when starting your business. The advantages to renting are that they can keep your set up costs to a minimum, particularly if you are renting an existing hairdressing business. However, when choosing the premises to rent consider your future options, in that one day, when finances allow, you may want to purchase the salon. Therefore look to see before signing any leases if this could be an option.
Commercial Mortgages to Finance a Hairdressing Salon
Whether you are looking to start your hairdressing business from scratch or are already trading from rented premises, commercial mortgages are available to help you buy your commercial premises.
If you are looking to purchase a salon to set up your hairdressing business you may be able to raise 70 to 80% of the purchase price of the property by way of a commercial mortgage. You will therefore be required to contribute the other 20 to 30% of the purchase price. This money usually comes from savings, or can be raised on equity from other property that you may own.
Should you be looking to buy the salon that you are already renting, you may be able to negotiate a discounted price, especially when taking into consideration any value attached to your existing lease. The amount of discount off the market value of the premises that you are able to achieve can count towards the deposit that you need to contribute towards the purchase of the salon. Therefore if you are able to achieve a 30% reduction in the purchase price over the market value of the premises, due to your position as the existing tenant, then it maybe possible to raise the full purchase price by way of a commercial mortgage.
Hairdressing Salons that are Run Down and in Need of Repair
You may find hairdressing salons that are run down and in need of some renovation. If this extra work does not put you off, then this sort of property can prove to be a profitable option.
Commercial mortgages are not usually suitable to purchase rundown hairdressing salons, therefore commercial bridging loans are usually the preferred option.
Commercial mortgages are not usually suitable to purchase rundown hairdressing salons, therefore commercial bridging loans, such as those offered by KIS Bridging Loans, are usually the preferred option.
A bridging loan can help fund the purchase of the salon and also the renovation. Once the renovation work is complete the salon should have increased in value, and should now be suitable for a profitable sale or a commercial mortgage. A commercial re-mortgage would be used to repay the bridging loan and if required perhaps provide a cash injection into the hairdressing business.