Real Estate November 16, 2017

Buying vs. Renting Commercial Property

At one point, business owners are faced with a difficult decision of obtaining a more permanent residence for their company. Having a central location for your business is crucial, as it’s necessary to have someplace to conduct business operations, hold meetings and ultimately grow. Yet, deciding whether to buy or rent a property for your company is indeed a tough choice to make. Both of these choices have their pros and cons, and the decision you make should be based primarily on your budget, but also other factors, such as future business goals and your business success.

Regardless of the decision you make, you should be ready to invest a substantial sum and decide whether a temporary location or a permanent one is the right way forward. Renting a commercial property gives you enough flexibility to move from one place to another until you’re satisfied while, buying a commercial property gives you full ownership, so that you can do whatever you wish with the place. Here are some advantages and disadvantages of buying and renting a commercial property.

Buying commercial property

Managing to buy a headquarters for your company is quite an achievement for every business owner, because it symbolizes business success. In addition, being able to purchase your own business property means that your incomes are pouring in and that your business has developed properly.

It’s no secret that every business owner wants to reach the goal of buying real estate for their company. Truthfully, it will happen sooner or later, the only question is should you buy it as soon as possible or wait for the right opportunity to do so.

Advantages of buying

One of the main benefits of buying commercial property for your business is the opportunity to have a permanent location and not have to move around constantly. That way your business will be easy to find and you won’t have to worry about informing your business acquaintances and clients about changing your location.

Moreover, you’ll have full ownership of the property and you can remodel or reshape it however you choose. Also, you’ll be inclined to tax benefits and you can always sell the place if you want to.

Disadvantages of buying

There are certain drawbacks of buying a property and the major one is initially having to pay a large amount of money. Whether you pay off the property in full or make a down payment, the costs are significantly high and non-negotiable.

Aside from initial costs, permanent location means higher utility and maintenance bills, as well as higher taxes. These costs will grow alongside your business, especially if you bring in more employees. Due to shifts in real estate market, selling your business property might become challenging and it may take a long time.

Renting commercial property

There are a lot of businesses that operate from leased properties and they tend to change their location often before they finally find a place to settle. That’s why renting a commercial property leaves room for flexibility, because it allows you to choose the location for your business and determine how long you will be staying there. This is great for small businesses with a tight budget, as they can manage their finances for a property for shorter time periods and change their location whenever they need to.

Furthermore, renting is more suited for startups that have passed their development stage and now require an office to operate from.  Also, small businesses that lack the funds necessary to buy a property, because they still need to focus on marketing and other business aspects, can benefit from renting real estate.

Advantages of renting

One of the main advantages of renting a property is that you can lease an office for a certain period only by paying rent and cut costs on having to buy one, while investing those funds in business growth and development. Furthermore, you’re not bound to a specific place and you’re free to move out if a better opportunity presents itself.

Sometimes, you may be obliged to sign a contract that requires you to stay on the property for an agreed time period, while in most cases you’ll just have to pay a monthly rent in advance.

Disadvantages of renting

The main disadvantage of renting is that you may have to vacate the premises without any solid reason if a landlord chooses so, even if you’re paying rent on time. Moreover, if you choose to rent properties for more than seven years, the costs of rent will ultimately exceed the costs of buying a property. In addition, landlords usually tend to maintenance and repairs, but some are not quick to respond to a problem and your business operations may be delayed until repairs are taken care of.

Renting allows you to cut costs while focusing on development and offers more flexibility, but sooner or later your costs will exceed those of buying a property. That’s why every business owner should have a plan for obtaining a permanent location for their business sooner or later.