When starting or relocating a business, the task of finding the right property can seem daunting. One of the main decisions that business owners will encounter is whether or not to lease or buy property. Both have their pros and cons, but there is not one right answer for everyone. You should ask yourself several questions before making a decision on this matter. How much growth do you foresee in your company’s future? What is the cost of buying (keeping in mind that this will include a down payment and a mortgage, but also initial inspection, appraisal, and loan fees) as opposed to paying rent? Based on market conditions, what is the investment potential of this property? Are you prepared to be a landlord if you should find that you have extra space? These are just the basic questions, and much more complicated accounting, tax, and legal questions can be expected down the road.
If this seems like a lot to manage, it is. It helps to break this task into several smaller ones. The first thing you may want to think about is the growth potential of your company. Are you just starting? If not, how much have you grown in the past year, and how much growth do you anticipate not just in the next year, but also in the next couple of decades? If you think you have reached your maximum potential, then you might want to consider taking the risk and buying. However, if you think you still have room to grow, or you are a new company and are unsure if your plans will pan out, then renting would be the better choice as it involves less risk and responsibility.
Either way, it is not advisable to make this decision and commit one way or the other without first consulting an authority. Being able to talk to somebody who is familiar with current real estate trends, accounting, tax, and legal matters can make all the difference, and can end up saving you a world of money and headaches.
Stay tuned next week when we will continue on our discussion of renting and buying commercial real estate.