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Should you buy or lease property for your business?

Maybe you dream of owning a business, or maybe you're in the process of starting one up. When you're planning your business, make sure you consider not just where you would like to situate your company, but also whether buying or leasing is right for you.

What should you consider when making this decision?

Financial costs

Of course, finances will be the biggest concern for your business. Leasing and buying both have financial pros and cons, so your choice here will be dependent on your vision for the company.

In the short term, leasing is more cost-effective. The initial costs will be lower, and the landlord will pay for upkeep and repairs. You can also build credit quickly this way.

Mortgage payments will most likely be more expensive than rental fees. However, unlike rent, your mortgage cost will not increase every year. You also benefit financially from being able to sell the property if you decide to relocate. If you can commit to staying in purchased property long enough to justify the initial costs, buying has long-term financial benefits.

Flexibility

As stated above, you will need to commit to staying in purchased property for quite some time, or the high costs will probably not be worth it. If you are uncertain whether you will want to remain in that space long term, you may consider renting instead.

Renting property gives you plenty of flexibility to relocate without much financial repercussion if you outgrow the space. Keep in mind that rent will likely increase every year, however, so you will want to consider the financial risk of not needing or wanting to relocate in the future.

Responsibility for property

When you rent property, your landlord is responsible for maintenance and repairs. This means you will not be paying costs for the materials and labor needed for upkeep. This also means you have little control over the efficiency and quality of necessary repairs.

Owning the property means you can ensure fast, high-quality maintenance work, but you will also be the one paying for that maintenance work. Your property will also depreciate over time, so your upkeep of the facility will factor into a reasonable sale price for the property in the future.

With so much to consider, it makes sense to talk to a commercial real estate firm about your business. An attorney will understand and explain all aspects of real estate ventures that you should know.

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