• Buying or renting is a tough decision many businesses face when starting up. (Supplied)
Whether to rent, or buy? That's the question facing many small businesses when they start out. Sometimes, the capital isn't there.. but there are other unconventional routes to owning your own premises.
SBS Small Business Secrets
24 Sep - 5:35 PM 

Hero HQ is the result of a "lightbulb moment" four years ago, that set teacher, Rachael Waia, and paramedic, Nikki Jurcutz, on a new path.

“We’re the youngest women to own a Registered Training Organisation in Australia,” says Rachael.

“The compliance side of an RTO is really difficult. And the reason is, we've got to give quality education, so people are able to use what we teach, in a real-life situation.”

They set up in their mother's double garage and started planning their future.

Rachael says, “We converted it into an office space, we had all hands on deck, we had our husbands, our mum, our brother, in there helping us fit it all out.”

It was an economical option that worked for a while, but when their company grew from 2 to 12, the four square metre garage soon became unviable.

Nikki says, “So we started to look around, at renting a business space, and it was really difficult. A lot of the leases are long-term leases, but what we could actually afford and what was within our budget, they were too small, we were definitely going to outgrow them in 12 months' time.”

They spoke to their financial advisors about purchasing a commercial property through a self-managed super fund.

“It is obviously heavily regulated and audited by the ATO, so you need to make sure you're really aware of what's involved, the ins and outs of what your obligations are.

Because you're becoming, all of a sudden, permanently liable, for your retirement.”

To purchase a commercial property through a self-managed super fund, you need a big deposit - lenders generally require a minimum 70 per cent loan to value ration.

While there may be some tax concessions, the conditions are very strict, so expert advice is vital. 

Nikki and Rachael combined their super for this $320,000 warehouse.

They can now determine their business's future, but what happens when it's out of your hands?

That's what franchisees Peter Ritchie and wife Jacqui Ellis faced when they were pushed out of their rental.

“When the franchise was sold, we had a lease on a shopfront that ended. We had to relocate, and made the business decision to share an office with another business,” says Peter.

“And that worked really successfully for us, for about four years, and at that point in time, that other business decided to expand, and they wanted their office space back.”

Left in limbo, Peter and Jacqui weighed up their options.

With a loyal client base, they no longer relied on foot traffic, so a shopfront wasn't necessary.

So they considered moving their company, InTouch Finance, to a warehouse and buying, rather than renting.

Peter says, “If you've paid a lease before and the lease on what you were paying is similar to what those loan repayments would be, it sort of makes sense then, and lenders take comfort in the fact that you're buying your own business, because you are securing your own, ongoing income.”

They settled on a space in the growing Mornington Peninsula, south of Melbourne. They use the front office and rent the rest to an artist, for $900 a month. There's also an office upstairs, so another tenancy is an option.

“The beauty about having a commercial property is, the bills that we incur, like the owner's corporation fees, and water rates, council rates, any land taxes, they're all shared between the tenant and us,” Jacqui says.

The focus isn't on paying off the mortgage - rather, the capital gain.

“The way our mortgage is structured is it's interest only, so you don't actually pay any principal component of that.

“It's set up as an investment loan for that purpose,” says Jacqui.

While this was an unexpected move, it's one they're now grateful for.

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