[fa icon="calendar"] 06.01.2017 / by Hunter Strickland
Whether you are buying or leasing a commercial property, it represents a major step for your business. Of course, many new or small businesses cannot afford to purchase real estate, but money isn’t the only factor to consider. Both options have their benefits and drawbacks, so you have to consider what your business goals are before making a decision.
Here are some of the biggest differences between leasing and buying commercial property:
When You Lease
If you haven’t found the perfect space or you aren’t 100 percent sure you want to buy, leasing might be the way to go. Here are some of the main benefits of leasing a property:
- There is no down payment required. When you buy a commercial property, you generally need to put down about 30 percent cash up front. When you lease, however, you only need to put down a security deposit which is usually just one month’s rent. This means you will have more money to invest in your business.
- You can deduct your lease payments. Rented or leased property, and any other items that you use in your business, can be deducted on your taxes.
- You are not responsible for repairs. Any repairs or maintenance requests will be handled by the landlord or property manager. You’ll have to check your lease to determine who is responsible for paying for these repairs, but somebody else will be responsible for performing them.
- It is easier to lease in a high-end area. Purchasing commercial property in a high-demand area can be too expensive for a newer business to afford. Leasing is a more cost-effective option if you absolutely need a space on Main Street.
When You Buy
Buying a commercial property for your business can have its own advantages, too. Here are some things to consider:
- You build equity. This is one of the biggest advantages of owning commercial real estate. You can eventually use the equity you collect to expand your business or even prepare for retirement.
- Your costs remain steady. When you take out a fixed loan, your monthly payments will not increase during the loan period. Leasing a commercial property means you are subjected to periodic rent increases.
- You are your own landlord. When you are the owner of your own building, you can essentially do whatever you want to it. You can knock down walls, replace windows, get new flooring and make other renovations as your business grows and changes. You can even rent out extra space for an additional source of revenue.
So Which Is Better?
There is no simple answer to whether it is better to lease or to buy. There are many individual circumstances that need to be factored into the decision process. Of course, finances will play a major role, but there are numerous other factors, such as freedom, short-term business and long-term personal goals, that should be taken into consideration when leasing and buying commercial property.