Should You Buy Or Rent a Commercial Property?

When it comes to building a business, there are so many things that a business owner needs to consider – and one of those is getting a business facility.

Should You Buy Or Rent a Commercial Property

As most of us know, having the right facility is one of the keys to make a business successful. However, getting the right commercial property is a complex undertaking that even those who have already been in the field for so many years are still having a difficult time making a decision every time they are faced with the same scenario. And one of the common questions that bother most business owners is this: “Should I buy or rent a commercial property?”

Before you prepare the documents and finalize your payment, you may want read the following guide first to help you decide which way really makes more sense.

Leasing vs. Buying: Time

So let’s say you have found the property that is right for your business. The next question now is, how long do you plan to stay in the same location? 5 years? 7 years? 10 years? If you plan to stay in the same building for less than 5 years, it much makes sense to just rent the property because obviously, that’s cheaper than buying it. However, if you see yourself and your business staying there for more than 10 years, then you can consider buying the property.

Leasing vs. Buying: Cost

Buying a property will definitely cost you far more upfront cost than renting a space. Typical down payment for commercial properties is between 10% and 30%. But the advantage is that when you own the property, you can claim tax benefits and other opportunity costs. You can invest your money in your business instead of giving it to the lessor. However, you should only consider buying a property if you have enough funds and you have plans to stay in the same location for a long period of time.

Leasing vs. Buying: Control

One of the advantages of renting a property is you have the opportunity to relocate – anytime – should you need a larger space or find a much better location for your business. But the disadvantage is that when the owner decides to sell the property, you will be forced to relocate even if you don’t want to yet. The great thing about buying a property, on the other hand, is that you get the full control of how you would use your property or how you would like it to look like. If you want to relocate, you can resell or rent out the property. Determine which of these will work best for you.

Leasing vs. Buying: Risk

Since leasing requires only small upfront cost, it is considered much less risky than buying a property. If you’re just starting out and want to minimize your risk, then leasing can be a better option. But if you have funds and don’t mind taking risks, then you can choose to buy the property.

There is no fixed right answer whether you should buy or rent a property. Your decision should be based on your specific circumstances. You would also want to talk with a professional to help you determine which option is best for your business. Some of the experts you would like to call are the following: accountants, commercial brokers, mortgage brokers, and real estate lawyers.