Commercial Real Estate: Should You Buy or Lease?
One question that every business owner must answer is whether it would be wiser for them to purchase the real estate for their business or lease it from a different owner. Buying is a good option if you want to immediately reap the rewards of owning real estate without all of the associated risks. Leasing, on the other hand, allows you to earn interest on your cash flow while you wait for the property to sell. Both buying and leasing have their benefits and drawbacks, but one thing that never changes is the desire to make money from day one. So set aside some time today to figure out which path will get your business where it needs to be.
The Advantages of Buying
Buying your commercial real estate comes with a higher up-front cost with the trade-off of recouping your investment if you choose to sell it down the road. Real estate investment costs typically include closing costs (if you choose to sell or demolish the building), assessing and grading properties, providing building inspectors with reports on renovation efforts, erecting new signs and advertising, and supplying key components to complete construction (e.g. structural experts to prevent collapses or other damages). In return you gain an asset that may appreciate alongside your business, and if you choose to change location then you can either sell the property to put it towards your next venue or lease it out to another business to produce an additional revenue stream.
The Advantages of Leasing
One big advantage of renting your real estate is just how much easier and simpler it can be as you pay only a fixed monthly rent plus certain utilities. Renting can also be cheaper, especially for short-term use, as trying to take out a loan to buy commercial real estate can leave you shocked at the interest rate. Plus, buying commercial real estate requires paperwork and inspections that can take weeks if not months to complete and cost you money, where if you rent your property the owner will be responsible for operations of that sort.
Making The Decision
Ultimately every different business will have to make their own decision on which way to acquire property to operate on. Your budget, the amount of space you need, how long you plan to be on a given property, and the location of the property are all big factors that will impact which decision is right for you.