The decision to lease or buy commercial property is a major financial consideration. It doesn’t matter if you’re an individual or a large corporation, buying property can make or break you. This is why it’s important to get all your facts in order before signing anything.
There are a few big questions people need to ask themselves about the pros and cons of ownership. Here’s how you can determine whether you should buy or lease your workspace.
How Much Capital Do You Have?
Even huge corporations will likely need to incur debt in order to buy commercial space. Small business owners almost certainly have to take out a loan to buy property. It’s extremely important you take a holistic look at your capital situation.
Say you’re barely making money, but have calculated that scaling will bring in more business. If you don’t have starting capital, this can be a huge risk to your company. Should things not go as planned, you might end up bankrupt. It’s often possible to lease a space before you buy it. Doing this will allow your company to gradually assimilate to a new space.
Do You Want to Deal with Ownership?
Property ownership isn’t always a walk in the park. In fact, it can be extremely difficult at times. When you lease a space, the landlord takes care of most maintenance issues. Buyers, however, will need to take care of these details on their own. Here are a few of the biggest expenses and headaches associated with owning commercial property:
- Need to address any structural issues with the building
- Must maintain appearance of the space—inside and out
- Have to pay taxes and utilities
- Must settle disputes with neighbors
- Have to take on responsibilities of landlord if renting out extra space
It’s a mistake to think that purchasing your property will solve all your business issues. Consider the extra responsibilities involved with ownership.
Do You Understand Various Forms of Liability?
There are also differences between leasing and owning when it comes to liability. You can’t underestimate the importance of this, as lawsuits can destroy companies. Renters generally need to show proof of general liability insurance. This protects the landlord and tenant in the event of an accident. However, you will also need to get legal protection if you are the owner of your property. If someone gets injured there and you don’t have proper insurance, you can get stuck with bills and damages.
Are You Sure of Future Expansion Plans?
Scalability is one of the most common reasons why businesses want to purchase commercial space. Buying a larger-than-needed building allows companies to seamlessly expand operations. On the other hand, you will need to pay for an excess of space. It’s possible that you’ll be able to rent some of that extra area. But that’s not a guarantee. Your company can get caught in a bad situation if it’s paying for unused square footage.
How Will the Property Appreciate?
Before purchasing commercial space, make sure it will at least hold its value. In an ideal world, it will appreciate over time.
Location is key to real estate values. To make a better buying decision, look at the surrounding infrastructure and community. Is the location easily accessible from major metropolitan areas? Are people moving in or out of the nearby towns? An influx of people often leads to rising property values.
There are a lot of things to consider when deciding to lease or buy property. It’s not a choice that should be made in haste. Take your time; do your homework; and consider the aforementioned factors before looking into anything.