If you are considering a new commercial real estate property for your business, you may be torn on whether to buy or lease the property. Each of these options has its pros and cons. Here are some of the factors to consider between buying and renting a commercial space.
The first thing to think about is startup costs. If you choose to buy a commercial property, you will need to have a lot more money to put down up front on your property, and your mortgage payments may be initially higher than the rent you would pay. If you are just starting out, this may affect your ability to invest money in your business, since a lot of credit and capital will be tied up in your new real estate purchase.
On the flip side, the initial costs of buying a commercial property will eventually be offset by the returns on your investment. Your leasing dollars will be going into someone else's pocket while your mortgage dollars would be going towards a piece of property that your business owns. If you can afford the extra cash in the beginning, then buying your own commercial real estate can be a great option.
Maintenance Costs and Time
Maintenance is another factor that would affect your decision to buy or lease. As a property owner, you would need to set up maintenance schedules and be sure to comply with legal codes on your own. Getting a property manager can help you to cope with these extra tasks, however.
Ability to Generate Side Income
Does being a landlord appeal to you? Another benefit of owning your own property is having the option of renting out part of the commercial space. One way to do this is to buy a bigger space than you need, and rent out the other portion until your business needs to scale up in size. The extra income you generate can offset your mortgage costs and give you a greater cash flow.
Finally, buying a property gives you control over the longevity of your business. If your leasing agent decides to raise the rent or kick tenants out, you'll be at their mercy if you want to keep a consistent location. Commercial space owners can decide if and when to move.
In short, your decision to buy or lease commercial real estate will depend on how much money you have to spend up front, and how much time you plan to spend on the property. Each decision can make good financial sense depending on your business strategy.Share