Most business proprietors must eventually face the issue of whether to lease or to purchase their office space. There are many circumstances to consider in making this critical decision.
For new business people who are unsure of their space needs in the future, and who want to secure highest cash flow as they run their market, leasing may be a wise option.
Read on to learn the benefits and advantages of leasing a commercial property, and it might help you decide what is best for your business.
Fewer Risk of Liability :
As a tenant of commercial space, you will have protection, and business owners need to have their insurance and other maintenance responsibilities. When you are leasing, you just have to worry about the space inside the building and continue with your business.
If you own the property, particularly the one with additional tenants, you may be held liable for any damages to the building, injured third parties hitting other businesses, and keeping a certain level of profitability through separate contracts.
Maximizing Flexibility :
The sad truth is, all things change. As a growing business, you also have prominent eagerness of raising your company. At that moment, you will probably need a small amount of space. However, it may not be able to accommodate the extra expenses in the future.
Since lease contracts are usually between 3 – 10 years, the level of flexibility is higher when leasing commercial property. Meaning, you can expand the size of your commercial space or move office locations much simpler than if you will buy commercial office space.
Also, there are usually more properties that are available for lease compared to real estates ready for sale. It will provide you more choices and greater flexibility concerning the types of properties you can utilize. However, some of these rent options may be too expensive to acquire but are affordable to lease for a couple of years.
Lower Cost of Monthly Occupancy :
Although it is possible that buying a commercial real estate is less expensive than leasing, most tenants notice that leasing is the better idea when it comes to a month to month basis. Rental is usually focusing on an after-tax basis.
Since the total of your business’ lease payments is typically deductible, the interest allocation only of a mortgage installment would be the amount credit.
Having Extra Liquidity :
If you are leasing commercial property, you are obliged to perform less regarding direct expenses. For instance, you should expect to cover some types of direct costs such as lease inspection, security deposit, attorney fees, and the possible payment for the broker.
Briefly, the amount of the direct expenses can be as much as six times of the price when purchasing a commercial real estate property. It will provide your company enough or even more liquidity since the few amount of your capital is bound up in a long-term asset.
If you are having a hard time deciding, there are some companies such as Rose & Jones that offers assistance when leasing a property.
Down Payment Talks :
While leasing may demand a deposit, the cash expenditure is significantly lesser than a standard down payment upon purchasing a commercial property. That can provide a positive value of money in your business and great impression towards your cash flow.
A typical issue among small business proprietors is whether it is right to lease the property. But the most significant thing they have to know more about is the costs.
Still, some factors they can maximize when leasing is their minimum level of liability while having extra liquidity and less or no down payment required. However, the choice of leasing still depends on the preferences of company owners and nature of their business.
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