Deciding whether to buy or lease an office can be one of the most important financial decisions a young business makes. Much as every individual must decide when the time is right to move from a residential rental into a home or condo of their own, many businesses must also decide when they are ready to buy or build a property. Very few businesses start out owning the real estate in which they are housed, but as a business becomes more established and financially solvent, the many benefits of owning its offices become apparent. If you are trying to decide whether to make the leap into owning, consider these pros and cons.
The Benefits of Renting
One of the major benefits of renting commercial property is flexibility. If you rent, you are better able to move to a new location if you find a better building or your current neighborhood no longer attracts the foot traffic it once did. You may also be able to negotiate a better rate or other perks with your landlord if you prove to be a good tenant.
The Benefits of Buying
The main benefit of buying commercial property is that is saves your business money over the long term. Buying usually entails a fairly hefty up-front cost in the form of a down payment on the property, as well as monthly payments until any loans are paid off. However, businesses that plan to stay in the same property for a long time often find buying more cost effective than renting. Owning a property also gives you more control over what happens there. You can remodel and install new features without worrying what your landlord will think. Finally, buying is stable. It projects the image that you are an established business rather than just a temporary start-up.
While buying may seem like a great way to save money for established businesses, there may be hidden costs associated with owning your own property. For example, if your landlord previously included things like cleaning, general repairs and maintenance, snow removal and utilities in your property, these costs may fall to you as the property owner. When you are doing calculations to ensure you have enough money to buy a property, make sure to take these costs into account. You should also give some thought to the size of your operation and whether it is likely to grow in the near future. If you plan to grow your business considerably, make sure that the commercial real estate you purchase can grow with you.
Buying as an Investment
Owning your office space can be a considerable investment for your business. It serves to increase the value of your business as an asset. In addition, if you decide to upgrade to a different office later, it’s possible to sublet your old property and turn a hefty profit. Just make sure you are in line with the real estate regulations in your area before you start shopping around for a new tenant.
Taking the First Steps
Whether you decide to buy or rent, you can begin by talking to a real estate in your area who specializes in matching businesses to office space. However, before you sign any contracts, do your homework about the area. Make sure that what you are paying is on par with similar offices around the same location and that the real estate you want has all the space and special features you need.
Purchasing real estate is a risk even under the best of circumstances. However, if you make smart choices, it also has a good chance of saving you money and hassle in the long run.
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