At some point, every company faces the decision about whether to purchase or lease office space. Leasing and ownership both have distinct advantages and disadvantages. Ask yourself these questions to determine whether buying or leasing is the best option for your business:
How long do you foresee remaining in your local area? How likely is your business to grow?
If you have a family-owned business that will always be located in your hometown and is unlikely to ever become a huge corporation, owning your building may be a good solution, as it will save you money on rent and give your business a tangible asset. For larger companies and those with no fixed geographic location, the flexibility of being able to move at the end of the lease to a different area or a larger building is often more ideal.
How much money do you have available at the present time to complete a real estate transaction?
If you have very little wiggle room in your operating budget, now probably isn't the right time to consider buying a property. The down payment and closing costs associated with commercial real estate transactions will be more expensive than the security deposit and fees associated with signing a commercial lease. Leasing is also a better option if your foresee that your company may have a difficult time obtaining financing for a real estate purchase due to cash flow concerns or a lack of an established business history.
Are you willing and able to manage the upkeep of a property?
If you lease a space or an entire building, you may be responsible for the cost of some repairs and maintenance, but your landlord will typically do the work of finding the contractor to complete the work. Should you decide to purchase real estate, everything will be left up to you. A brand new building may not require expensive repairs, but you'll still have the expense of upkeep to consider.
Are there major tax advantages to purchasing commercial real estate?
In some geographic areas, local, county and state governments provide lucrative tax incentives for companies that invest in commercial real estate and make specific localities their base of operations. If you are hoping to locate your business in such an area, the tax advantages of buying property may offset other associated costs.
How certain is the real estate market in your area?
While it's never possible to completely predict the future of any geographic area, some places have more potential than others. If your company is located in an area where property values are on the decline, you may be able to purchase something at an inexpensive price but then find that you are not able to sell it for the amount that you paid. On the other hand, if you are considering real estate in an area about to boom, it might be advantageous to purchase now, so that you can sell in the future at a profit.
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