A Business Calculated Risk for Success
Happy New Year 2023. I am Jacent, a content writer in AllaboutFnB and a real estate professional.
In my trade, I meet and make friends with many business folks and entrepreneurs, I love to know people and to hear about their stories. So, I have this friend in her 50s, living in a nice Semi-D, who runs a successful restaurant in the East.
During a lunch session with her, I asked how her family-run restaurant stayed successful for over 20+ years.
Due to privacy, I will not mention the name of the business but about what brings on the success.
So she candidly shared her experiences and decisions for the business and 01 little secret. It’s a great decision many did, but not everyone is able to.
The food business was started by her father in a coffeeshop in 1960s before expanding to a restaurant in 1999. Within the 1,800sqft space, they utilized automation in both food services and kitchen to ease the operation. Good staffs, friendly services, comfortable environment, food quality and speciality unique offers attracts the office folks and families from weekdays till weekends.
So, the not so simple secret is:-
“They bought the restaurant shop space” The property itself and became their own landlord.
It was a CALCULATED RISK. She confessed there were initial fear about the mortgage being tied to the business income and unsure of the future. However, the deciding factor is, they own the property and can lease or put up for sale in event of misadventure. They PLANNED for the long term.
The Business and Property Owner
It’s no secret that property in Singapore makes good investment, people buy and sell for profits, commercial or residential. It is a norm that landlords will increase rents over the years.
Thus, whichever trade you are in:- to put your money where your mouth is, is a financially wise long term decision.
For any business, owning the business property reduces future rental, relocation risk. Reinvesting business profits into owning the property creates 2 asset classes. Your business and the property. It’s a sustainable strategy and a calculated risk just like what this friend did.
The downside is, it is cash heavy, no CPF usage and higher interest rates than residential loan. The good is NO ABSD and seller stamp duties SSD for commercial properties
Truth be told, we need to think through many aspects before moving in this direction, not every business / business owner is suitable. Location, business needs, financial & business sustainability are needed to be considered.
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