Leasing or buying an office space is a major financial investment. There are, of course, pros and cons to each one. For businesses, the main factor to consider is the budget. If you do not have the money, you cannot purchase the property. But what if you do have the money? Should you dive into this real estate investment or forego the idea of owning a commercial space? Is it more economical to just lease the space?
The issue is similar to choosing whether to buy or rent a house and lot. Owning a property is always better than renting one. After all, when you lease a property, there is always the chance of the owner not renewing the contract or even terminating the contract before it ends. You will find yourself without a location to operate your business from. What then happens if you’ve already built a clientele in that area? You will be forced to rent a space near your original office. And it that rental space happens to be expensive? You might not have an option but to pay for it anyway.
And then, there’s the matter of owning the space. If you can afford it, is it a worthwhile investment? Can you recuperate the money you are losing every month to pay for the mortgage through your business profits? Can you rent out part of the property to help you pay for it?
You Should Purchase When…
Once you have established a winning business location, you don’t want to lose it when the landlord wants to use it for another purpose. The best thing to do is make an offer if the success of your business hinges on the location. Remember that when it comes to leasing a property, the power is completely on the landlord. Once the contract ends, the landlord is not obligated to rent it out to you again.
Think about buying the property when you want to control it. Any addition you want to the facility has to be approved first by the landlord. If you decide to expand your office space (add a balcony, for example), the landlords must agree to it first. Even if you want to extend your operating hours, you might still need the permission of the landlord.
Another thing that you have to consider before purchasing a commercial property is the appreciating or depreciating land values in the area where your business is located. If the value of properties is increasing in the area, then you can make this investment today with the hope of turning a profit if you decide to sell in the future. However, make sure to buying before the prices jump.
You Should Lease When…
Obviously, if you cannot afford the property, you can just lease it for now. Make sure to review the contract before you sign it to know what you are getting into. Study the contract’s limitations because it’s vital to know what you can and cannot do to the property while you are leasing it.
Owning a property will require you to maintain it. If you don’t want the burden of maintenance duties, you should probably lease the property. Many leasing contracts will put the responsibilities of maintaining the property on the landlord’s shoulder. While you have to maintain the space that you are renting, the building’s overall maintenance will still be your landlord’s responsibility.
Are you sure that you want your business to stay in that location? It might not be the most optimal location yet for your business. As such, you do not have to invest by buying it right away. You can test the waters by renting the office space and make the necessary move when you find a more suitable place for your business. If you want to be mobile, you cannot purchase a commercial property yet.
If the facility is an area where properties are declining, it would be better to lease instead of buy. You will lose a significant chunk of your money if you invest in a property with declining values. Leasing will protect you from declining property rates.
The choice between leasing and buying is not a tough decision to make. You only have to look at your budget and if your budget allows for both, consider the flexibility and mobility you want for your business. Unless you are considering acquiring a property as a business asset (one that you could sell for a profit in the future), leasing makes more sense for a business that’s not as stable as the bigger ones.
