Considering buying the building that currently houses your business? Defining the advantages and disadvantages of buying or leasing your building can help you make an informed decision. Below you will find a breakdown of each.
At some point, every tenant is faced with the dilemma of deciding whether to lease or buy his or her real estate facilities. While every business is different, there are a few common factors that should be taken into consideration when evaluating whether to buy or lease office space.
Comparing the benefits of leasing versus buying from a cash standpoint is an important step, while looking at the businesses future needs. The long term space requirements are also an important part of deciding whether to lease or buy.
Often, when beginning a business, leasing appears more appealing. Cash flow is the main reason. When a tenant is purchasing office space, it takes a larger portion of cash up front, typically a down payment between 10% and 20% of the purchase price, depending on the lender and credit, plus closing costs. What is the opportunity costs for those dollars if used in your business? Most business owners facing this decision for the first time can feel overwhelmed. The thought of borrowing money to buy commercial property is intimidating. Ownership can also bring its separate set of headaches – being responsible for maintenance and operations have a great deal of go to the site. It’s time away from running the business should you decide to manage the property yourself.
However, buying office space certainly has its advantages. Developing equity in a building or office space can be a sensible way to grow your business or personal wealth portfolio.
Before making any decisions, do the homework; know the pros and cons of both buying and leasing.