Leasing vs. Buying Commercial Real Estate for Your Business

Throughout the country, there are ample opportunities to lease commercial real estate and while purchasing options are also plentiful, they do not compare to leasing in terms of availability. Finding the ideal location for your business is one thing, but managing to purchase it outright is another matter entirely. Let’s face it, if you find prime real estate in a shopping mall, for example, it is unlikely that a landlord will be selling when he can simply rent the space from here to eternity. As a business, do you actually need to purchase commercial real estate or is it okay to simply rent it?
Purchasing vs. Leasing Commercial Real Estate

Purchasing vs. Leasing Commercial Real Estate

Why You Should Lease Commercial Real Estate

An outright purchase will be expensive, especially now that the market is showing signs of recovery. Businesses with a limited cash flow may find it difficult to come up with the 10-25% of purchase price that is required, not to mention closing costs. If your company would be better off using these funds to improve an existing property, it may be better to lease, save, and grow. Here are some quick pros and cons of leasing commercial real estate. Click here to view commercial real estate for lease in Montgomery County.

Pros

  • Credit ratings are not as important as when you are making a purchase
  • You don’t have to worry about selling it if you are moving
  • Rent is tax deductible as it is a business expense
  • You can sublet or move at the end of the lease, thus giving you an element of freedom

Cons

  • No equity buildup
  • You may be forced to move at the end of the lease
  • You could be hit with rent increases
  • Your company may be restricted in terms of hours of business
Why You Should Buy Commercial Real Estate

For many companies, owning commercial real estate is a sign that they have ‘made it’. If your business is successful and growing, purchasing commercial real estate outright makes sense, especially if you plan on staying at the same location for a lengthy period of time. If you can make the purchase now, it’s very likely that the value of the property will increase in the next five years; it could yield a significant profit, should you elect to sell in a few years time. Here are some pros and cons to purchasing commercial real estate. Click here to view commercial real estate for sale in Montgomery County.

Pros

  • Rental payments can be seen as ‘dead money’ whereas mortgage payments are investments in the future
  • Your equity in property will improve over time, so expect to make a profit in the long-term, especially now that the worst of the recession is finished
  • There are no potential issues with landlords and you can use the property as you wish

Cons

  • Inexperienced commercial real estate owners may prove to be inefficient owners and increase the company’s operating costs
  • You will be subject to legal and regulatory risks not associated with leasing
  • You will need to fix repairs yourself or pay an expert to do it, as you have no landlord footing the bill

To find out which option best suits your business; you need to look at factors such as cash flow analysis, to determine how much money your company is likely to have in future. You should also analyze whether the company’s likely growth will be steady, as well as taking into account other factors, such as insurance costs, maintenance prices, and tax breaks.

Image license:
Signing tenant agreement – iStockphoto (view source)

 

line footer

Website provided by
Phoenix Online Media Logo