Own Vs. Lease Business Space
If you're searching for a location to run your business, you might have a hard time deciding whether to own or lease a business space. As is the case with any major purchase or business decision, there are pros and cons to owning a commercial space and leasing a commercial business space.
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Upfront Costs
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If you're planning to buy a business space, you typically have to make a cash down payment of at least 10 percent of the purchase price, which is significantly higher than the upfront cost involved in leasing a business space. To lease a business space, you typically have to come up with the first and last month's rent payments. On the other hand, when you buy a business space, you know what your monthly payments will be on the mortgage (if you have a fixed rate mortgage). When leasing a space, your monthly rent payments can change based on the going market rate.
Operating Costs
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You must consider the costs to operate and maintain the business space. When you own a property, you are responsible for paying operational costs such as water, lights and cleaning fees. When you lease a business space, however, many of these costs are included in your lease payment or can be negotiated into your monthly rent fee.
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Growth
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Before deciding to rent or buy a business property, first consider which stage of growth your business is in. If you are just starting your business, then leasing a business space provides some flexibility. As your business changes and grows, you can choose to lease a new space that is more conducive to your business needs. If you own a business space, you have less flexibility with growth changes in your business. Owning a business space might be more beneficial for stable and mature business entities that already know their business needs.
Taxes
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Tax considerations are another important element to compare when deciding between leasing and owning a business space. Monthly lease payments tend to be fully deductible. When you own a business space you have the tax advantage of writing off the depreciation on the property and any improvements you make to the property. Mortgage interest also tends to be fully tax deductible. Consult with a tax professional on the financial considerations of owning or leasing business space for your personal situation.
Appreciation
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When you own a property, you can take advantage of appreciation in the value of the property by accessing equity or making a profit when you sell the business space. If you are leasing the space, even when a property appreciates in value, you have no rights to take advantage of it.
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References
- Photo Credit business space image by Robert Kelly from Fotolia.com
