Should You Lease Or Buy Commercial Property?

When it comes to the commercial real estate market, there are plenty of options. However, you should keep your business in mind when deciding whether to buy or rent commercial property. When making decisions, it's best to understand where your company will be in 5–10 years. One of the benefits of leasing is flexibility. Therefore, companies looking to grow may want to hold off on permanent purchases. On the other hand, you may incur high implementation costs right from the start of your business, so it would be unwise to move every few years and carry those costs with you. Therefore, buying real estate is probably the best option. Below, we take a look at the various factors that go into deciding whether to rent or buy commercial property.

cash payment

How much money can I spend? If a real estate agent sells him a commercial property for $450,000, it could be rented for $3,500 per month. If you decide to buy, you'll probably need to make a down payment of about $135,000. Other costs, such as loan fees, building appraisals, and inspections, make leasing an option for startups without significant capital.

growth

Once you have enough money to buy, look at the future of your business and see if it has the potential to grow beyond its existing space. Moving from a property you own is more disruptive than moving from a rented building. If you rent, you can also rent more space in the same building, saving you the hassle of moving. Exceeding the square footage of your property is not necessarily a serious problem. You may be able to sublet the building while you search for a new property. The rent you receive can cover your moving costs.

recognition

As soon as you buy a building, you are investing in real estate! If you buy in an area where property values are highly valued, you may be able to sell at a profit in the future. If your building is too large for your needs, you can rent it out and become a landlord. Remember that owning real estate takes a lot of effort, but it can also bring great returns. It is common for businesses to benefit from real estate rental tax deductions. The owner of a rental property can write off the repair costs immediately, but the cost of improving a commercial property is deducted over 39 years, and the depreciation expense also accrues over the same period. Therefore, if he buys a property for $250,000 with a land value of about $60,000, he can depreciate only about $5,000 of the purchase price each year, regardless of the amount of his down payment. Overall, renting commercial real estate is the best choice for people who don't want to make a large upfront investment and don't know how much space they'll need in a few years. Established companies are better off buying real estate because they can afford it and plan to stay in the same location for a long time.

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