The foremost common question for business owners is whether to buy or lease a commercial property. The answer to this dilemma depends upon a variety of factors such as the business term period, expected future growth, cost of property and most importantly budget consideration for capital and maintenance.
Firstly, let’s understand what we mean by leasing and buying?
Leasing a commercial space means that you get to use the property albeit restrictions built into the agreement. General pros of leasing are easy budgeting and more liquidity and flexibility. While the cons of leasing include expensive rent and absence of equity and control. Commercial leases run for a specific period of time, i.e. 1-10 years. A commercial real estate is a long term-term asset if taken care of properly. The pros of buying a property are building equity, rental income and more control. While the cons are expensive down payment and other fees, and difficulty in procuring financing, loss of liquidity and additional liability.
Here’s a check-list to help you decide whether to buy or lease office/commercial space:
- Lease: If you are looking for a workspace for less than a decade, then leasing is the best option suitable for temporary use.
- Buy: If you are planning a permanent office space or for more than 10 years, then choose to buy out a space for the required longer tenure.
- Future Growth
- Lease: If you expect exponential growth of your business venture and will require additional space for expansion, then it is prudential to lease a space and shift to a bigger place when needed.
- Buy: If you are not expecting a boom in your business and will stay in a steady business run on the same-scale then it is wise to buy the property.
- Property rates
- Lease: When property rates are frequently fluctuating, are overinflated or are declining, leasing proves to be a secure option. Ownership is too risky for businesses if property rates are unpredictable.
- Buy: If property rates are burgeoning or are expected to inflate then buying a property will prove to be profitable for you.
- Capital Consideration
- Lease: If you want a low initial financial commitment with no down payment then it is smarter to lease a property.
- Buy: If you have a handsome amount of initial investment then go for buying the property.
- Lease: If you want to steer clear of all repair and maintenance work, then lease your workspace.
- Buy: If you want to take ownership and maintain your property your way, then buy your own office space and use your resources to get the best out of the property you own.
Keeping in mind these pros and cons of buying or leasing respectively makes acquisition of commercial real estate simpler. Now, equipped with the fundamental knowledge about buying and leasing, thoroughly evaluate your situation and opt for the more suitable investment option as per your requirements with Kore Communities.