When does buying commercial property make more business sense than leasing?
Deciding whether to buy or lease a commercial property can be far more complex than making the same decision for a personal house. You can plan ahead on whether you want a change of scenery, a bigger or smaller house, but it’s more challenging to figure out which would be best for your business. One thing is for sure, if you’re planning on starting a business, you’ll need space for it; whether to buy or lease a property for it would be the next question.
Naturally, there’s no one perfect answer to the question. As always, questions like these beg for the answer: it depends. There are many things to consider before making the decision for a business, some of which we’ll be discussing here.
Know your business needs
Before you decide, plan ahead. Know clearly what your business needs are. Do you need lots of space for storage or do you need space in a central area?
How would you like to spend your money?
Buying will cost you a lot more in the beginning. You will have to consider maintenance expenses as well as the running of the business itself. Yet buying will also give you the liberty to make any necessary changes to the infrastructure of the place.
Leasing, on the other hand, will cost you less in the beginning. You should calculate the actual price of leasing depending on how long you plan on using the property.
Will you need a new space in a few months or years?
Keep in mind that your business could improve within a matter of months. The space which you deemed enough when starting, could eventually prove to be quite small.
Go for leasing...
If you don’t yet have enough capital to both buy the property and improve your business, go for leasing. It will give you time to add to the capital and eventually be able to purchase.
If you’re still testing new areas or businesses, leasing would be ideal as it gives you more flexibility. It gives you a chance to act faster when the need arises, something which could prove beneficial to the business.
Maintenance is also generally handled by the owner of the property, which cuts down on your costs. Yet leasing does not give you enough control over the property. If you need to make changes to the building, you might not have the permission to do it.
If you want to have full control of your property, you will need to buy it. Owning property can be a good investment, if planned wisely. But how do you know if it is the best choice at that moment in time?
One could consider purchasing when the cost of making improvements on a leased property is bigger than that of purchasing it. It is also wiser to purchase commercial property when the business cash flow is stable and growing.
Another advantage is that you could be saving money by buying. Lease prices are subject to increase over time, so buying your property at the right time could prove to be a very wise decision.
So, what should I do?
After considering these points, one could easily come to a conclusion that it’s probably best if you start off leasing commercial property in the beginning, thus getting a better idea of what’s best for your business. This would also give you time to grow your capital and eventually lead you to move into a more suitable property which you can purchase when your business has grown and settled down.
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