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Should You Lease or Buy Commercial Space?

The choice between leasing and buying commercial space is dependent on a number of factors. The most important aspect to put in mind is your type of business. Is it a new business or are you expanding an already existent one? There is also the aspect of cost, business finances, tax implications, as well as property value. Every potential and current business owner needs to understand what he or she benefits from each option before settling for one.

Leasing Commercial Space

A commercial lease will run over a given period, normally 3 to 10 years after which you may choose to renew your agreement or take an alternative. During this duration, you will be a tenant.

Pros of leasing

Low initial financial commitment

You do not need to make a down payment but a deposit initially. This means that you do not need a hefty capital to secure office space.

Office

Tax-deductible

Lease payments are tax deductible leaving you with more cash to finance the business operations.

Shared responsibilities

The responsibilities of maintaining the property are shared between the property owner and yourself. Depending on the agreement, the landlord may address concerns such as repair. You may also end up sharing some cost utilities such as waste management or housekeeping. You, therefore, have more time to focus on your business.

Flexibility

Leasing office space allows for flexibility as you can easily switch location once you outgrow it. Depending on your financials, it is cost-friendly to lease a piece of property as compared to buying it.

Cons of leasing

Lack of control

Leases come with some restrictions and in an effort to control what the tenant can do they also have termination clauses.

It does not mean that your rent will not change if you choose to renew your lease contract. Normally, renewal comes with an increase in payment.

Buying Commercial Space

Work Office

Buying office space means that you are your own landlord and while you are in business, the property is part of your long-term investment. LCI Realty can help you to identify ideal commercial space to suit your business preference.

Pros of Buying

You secure an appreciating asset

It gives you the ability to benefit from capital appreciation because the property will appreciate in value over time. Factors that will determine the rate of appreciation include inflation, interest rates, and supply and demand condition in the region.

A source of rental income

After purchasing property, many businesses may not occupy 100% of the property. This leaves them with the ability to rent out space thus giving an extra source of income.

100% control

When the property belongs to you, you are the final decision maker.

Fixed cost

Your payment stands as a fixed cost and it is not liable for change at any time.

Cons of Buying

Hefty initial financing

Even when seeking financing, you are required to make a hefty upfront expenditure. This can be very challenging if you are launching a new business because you are not sure of its returns.

More complicated to qualify for financing

Again, new businesses may find it difficult to secure financing, especially without a credit record.Now that you understand what you, stand to gain or lose for both leasing and buying commercial property, you can evaluate your business and settle for the most beneficial option. Check on your financing capabilities, flexibility, and long-term business goals and objectives.