The Pros and Cons of Leasing and Buying Commercial Space
As part of your ongoing business growth, you may feel the need to acquire more commercial space. You have the option of either buying or leasing property to meet your needs. Here are the advantages and disadvantages of each to help you make an informed decision.
Advantages of Buying Commercial Space
If you purchase commercial space with a mostly fixed-rate mortgage loan, you are immune from ever-increasing rent, and you may be able to reduce the payments even more through refinancing. When you complete the payments, the place is yours rent-free. As the owner, you have absolute control over building improvements, enhancements, and expansions. You have space for future growth, and possibly even space to rent to other companies. You can claim tax deductions for depreciation, repairs, maintenance, mortgage interest payments, and other expenses.
Disadvantages of Buying Commercial Space
The initial costs are significantly higher when you buy rather than lease commercial space. Additionally, you are responsible for repairs, maintenance, and financial management. Insurance and property taxes may rise each year, and over time the location may depreciate and make the property less desirable for resale.
Advantages of Leasing Commercial Space
Leasing commercial space involves less initial expenditure. Although you may need to put down a deposit, you are not required to come up with a down payment. It’s also significantly easier to qualify for a lease than for a mortgage. The landlord is generally responsible for repairs and maintenance. Locating a property to lease is less trouble than finding a building to buy, and if you become dissatisfied with the location, it’s easier to move. Additionally, lease payments are tax-deductible business expenses.
Disadvantages of Leasing Commercial Space
When you lease commercial space, you are subject to periodic rent increases, and when your lease expires, the landlord has the option of evicting you, necessitating a costly move. You have no control over repairs and improvements, and no equity in the building. You are restricted to the space you have rented, and have no room for expansion.
For more advice on leasing and buying commercial space, contact Trihawk Capital.
