To Buy Or Not To Buy

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7 Jan. 2018. As you grow your business, you will probably one day find yourself having to decide whether you should buy your office space or rent it. There are pros and cons to both, so in order to make your decision easier, here are the critical facts of leasing versus buying office space.

To buy

There are many pros to buying your office space, such as the fixed costs which mean that your commercial mortgage will be locked in long-term which can give your business clear, fixed prices. Then there are the tax deductions; the associated costs of owning and running a commercial space can provide tax deductions in the form of mortgage interest, property taxes, and other items and finally, there is the additional income. If you own your office, you can offer the advantage of renting out extra office space, which adds another source of income.

There is also the prospect of owning commercial space, and if the property appreciates over time – which is likely that it will, it could allow you to sell it and then fund their retirement.

Or not to buy

Now there are reasons not to buy and to look into commercial lettings instead. The lack of flexibility from buying means that a new or growing business may experience unexpected needs in the future, so if your company continues to grow, your owned office space may become inadequate, forcing a sale of the property.

There are also upfront costs to consider. When you buy a commercial space, it will initially cost far more upfront with the appraisal, and maintenance costs along with a sizeable down payment and possible property improvement costs.

To buy

There are cons of leasing office space too, such as variable costs. With a leasing option, you may be subject to annual rent increases and higher prices at the time when your lease expires. There is also no equity in it. While leasing you are potentially funding someone else’s retirement with your lease payments instead of owning and possibly funding your own as it requires you to get involved in the property management business.

Or not to buy

However, the pros of leasing an office space include providing a business with the chance to rent in an area with an excellent location and high image. If your small business is dependent on location and image, such as retail or restaurants, the leasing option is much more affordable. It can also free up working capital as your money is not tied up in real estate it means that your business can respond to opportunities in the market. In addition, your ability to borrow funds will not be as limited as with buying office space. It also gives you more time and less headaches as you can focus solely on running your business rather than managing a property as well.

So, that is the question, and only you can provide the answer for what is right for you and your business.

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