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Pros and Cons of Traspaso and Leasing a Tenerife Bar

The most common way to buy a bar for sale in Tenerife is by purchasing a traspaso, or leasehold. A lease on a Tenerife bar includes the machinery, fixtures, fittings and license related paperwork of the bar and will often take into account a certain amount of goodwill.

There are two reasons why traspasos are more common than freeholds. The first is availability: there are more leases for Tenerife bars than there are freeholds. The second is that freehold bars in Tenerife are more expensive.

When you buy a traspaso, it is important that you have the right to resell the lease. In many contracts, the owner of the freehold of that business will be entitled to a percentage of the price you resell it for. Depending on the terms of your lease, this can be between 10% and as much as 25% of the price. In some cases a good lawyer may be able to negotiate this rate down, or even get it removed.

A lease to rent a business obviously means that there are fewer options available to you. If you want to make alterations or change the use of the building, you will probably need permission from the freeholder.
A second disadvantage is an accounting one, because a lease shown on your profit and loss account, reducing your profits. This may be perceived to be an advantage if you are paying too much tax because your profits are high!

In fact, there are some worthwhile advantages to owning a lease rather than a freehold and many buyers of bars for sale in Tenerife disregard freehold properties entirely.
The lower cost of a leasehold means that you may even be able to buy several leases for the price of a freehold, and the return on your capital investment may be much higher. This solution also has the advantage of spreading risk. Lower costs also mean that you have more capital with which to run the business and this can be a lifesaver, particularly as the nature of tourism is seasonal.

Both freehold and leasehold Tenerife bars for sale can be viable businesses, but general comparisons are difficult. A leasehold in a popular area may provide a far better return on your capital than a freehold in a backwater. You need to make a direct comparison of the particular bars for sale in Tenerife that are within your budget before a real comparison can be made. You will find that a good Tenerife Business agent will be invaluable in this.
 

date added: 04/10/2012

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