Buy or Lease? A Beginner’s Guide to Commercial Property

While many of us have had to work remotely during the COVID-19 pandemic, many businesses will soon be returning to their commercial space. While working from home, if you are a business owner, thoughts of your commercial space might have come to mind. Whether you are thinking about expanding or minimizing your existing business or want to start a new business venture, your current commercial space might not be as suitable for your new needs. One of the first steps you will need to take is finding a new location and then deciding how to finance it.

Money is normally the biggest deciding factor, so choosing to rent or purchase a commercial space, if you have the option, is a big decision to make. Deciding to buy or lease your next office space may depend entirely on your business type, size and goals. When you purchase commercial real estate, you can either buy it outright or finance it with a loan. When you choose to lease, you rent the term for an agreed-upon amount of time and once this time is up, you must renegotiate the lease if you’d like to stay.

As with every decision, there are pros and cons. Several factors should go into choosing the right acquisition strategy for you and your business. While money is a large factor, it is not the only factor that helps play into the final decision-making process. We have come up with some pros and cons to help you decide if buying or leasing is the best option for you and your business.

Buying commercial real estate

● Pro: When you own the property, you are in control. No need to worry about negotiating with a landlord, you are the landlord! And depending on the property, you may have extra space and can rent out to add some extra income.

● Con: As you know, buying upfront or taking out a loan is a substantial financial commitment. Another large commitment in owning a property means responsibility for maintenance and any unforeseen issues that may arise with the building itself. 

● Pro: You can save money on taxes. You can deduct mortgage interest from your taxes as an expense.

Leasing commercial real estate

● Pro: You can focus on the important stuff: your business. The stress of managing commercial property can be hard and can take away time from bettering your business. This allows for more flexibility in relocating in the future and no added stress of trying to sell the property.

● Con: Rent can be expensive. Rent payments can often cost more than your monthly mortgage payments.

● Pro: Leasing opens opportunities to prime property locations you might not be able to afford buying upfront. If your business calls for a more prestigious location and building, renting is a more economical option to give you the high-end property your business needs to strive.

Copyright 2024 The Business Journal, Youngstown, Ohio.