If you’re looking for a commercial space for your business, you may be wondering if it’s better to lease a location or buy a property outright. Both of these choices come with some unique advantages and potential disadvantages, so it’s important to consider different aspects of your business and your financial situation before you make the decision. In today’s blog, we look at some of the factors you should consider before deciding to buy or lease a commercial space for your business.
Commercial Investing - Buying Or Leasing?
Let’s take a closer look at some factors you’ll want to keep in mind before you decide that buying or leasing is right for your business.
- Is It Enough Space? - Should your business expand like you hope it will, will that location have enough space for operations? If it’s possible that you’ll outgrow your location, leasing makes more sense than buying. Leasing gives you more ability to move to a new location at the end of the contract.
- Building Equity - Renting offers plenty of benefits, but you’re not building equity in the property since you don’t own the land. Depending on how long you hope to use the space, it may make more financial sense to purchase the property and pay a mortgage every month instead of paying rent to a landlord. Even if your business fails, you may end up making money on your investment if property values continue to follow recent trends.
- Lease Terms - Make sure you understand the terms of any rental lease, otherwise you may end up acting like the property owner without the benefits of actually owning the land. Learn who is responsible for property maintenance, taxes and insurance, and don’t be afraid to negotiate terms of a lease if you aren’t satisfied with the offered terms.
- Financial Flexibility - You have more financial flexibility when you lease a space because it requires a much smaller downpayment. If this is your first business and you’re unsure if it will take off, the flexibility to close the business and terminate a lease may be more ideal than trying to sell a property if you are still underwater on the mortgage. However, if you have a proven track record of successful businesses and have the cash flow to support a large down payment or purchase, you can save a lot of money and build equity by buying the property.
- Control The Unknowns - You’ll have more control over potential unknowns when you purchase the property. You won’t have to worry about rent increases, if your landlord is going to sell the property or whether or not a title issue will arise with your landlord, but you can control these issues if you buy the property. You could still encounter title issues after purchasing the property, but this can be handled by securing a title insurance policy.
- Customization - Finally, you may have more control over improvements and customizations to a property if you own it. At a minimum, have a conversation with a landlord about what type of freedom you would have to improve or adapt a space to your needs.
We understand that your financial situation will play the biggest role in whether or not you’re looking to purchase or lease a commercial property, but these above factors should also be considered so that you can bring your vision to life without setbacks. For assistance finding a commercial space that’s right for you, connect with the team at Commercial Partners today at (612) 337-2470.