One common dilemma that many business owners face when seeking appropriate business property is whether they should lease or buy. Business property realtors know there is no straightforward answer to this question since every business is different and operates with different requirements and limitations.
Before you decide on leasing or buying business property for your company, it is important to understand the positives and negatives of each in order to make an informed decision.
Leasing Business Property
A large portion of current business property is leased. Leasing is preferable for many companies due to the advantages it offers over property ownership. Although there are certain disadvantages to leasing, the benefits may outweigh them which makes leasing a better option. Following are some of those benefits:
- Advantages to Leasing - The main advantages business property realtors suggest you may have when leasing space include the ability to occupy prime locations and it being more financially feasible. If a certain location is important to your company, leasing may be the best option. Leasing requires no down payment and can be more cost-effective for some. Lease payments are also tax deductible as a business expense. In addition, leasing is more flexible since your company is not permanently tied to one space and can relocate as desired. It also alleviates you from having to deal with maintenance and repairs.
- Disadvantages to Leasing - On the downside, leasing usually comes with annual rent increases and lacking the ability to earn equity in the building as you would when buying business property. Other negatives include a lack of control over the building, the time and expense required to maintain the building, and the possibility that your company may have to relocate at the end of the lease.
Buying Business Property
In other situations, companies may gain more benefits through business property ownership rather than continual leasing. Business property realtors agree that for those with enough capital to invest in a commercial building, there can be just as many advantages to buying over leasing. As always, there are a few negative points to consider as well, such as the following:
- Advantages of Buying - Buying business property gives you complete control over your building, allowing you to modify it as necessary so your company can grow most effectively. You will also gain equity in the property with every mortgage payment. Your mortgage interest, property depreciation, maintenance and repair costs, as well as certain other expenses are tax deductible. You will never be forced to leave the location at the end of a lease and you may even benefit from some income by leasing out unused space to other companies. Over time, your property will also increase in value.
- Disadvantages of Buying - The biggest disadvantage to buying a property rather than leasing it is doing so can initially be more costly since you must have a substantial down payment. As the building increases in value, your property taxes could also increase. Also, you will have to maintain the building. Most importantly, once you have invested in a building, it is yours. If it does not work out for your company as expected or if there is a shift in the commercial market, your location may be less desirable and your options are to either stay or to sell. Considering this, the search for the right building could be more time-consuming and complex than if you were to lease space.
Often the decision on whether to lease or purchase business property can be made based on your company’s finances and whether you can actually afford to buy in the first place. Yet when the finances are there and both options are open, you must carefully weigh all the pros and cons before you commit to buying business property. By working with experienced business property realtors who understand both sides of this important question, you will be able to make the decision that will benefit your company the most!