One of the many big decisions owners have to make when finding a location for their business is whether to lease or buy commercial real estate. Of course, there are pros and cons to both options and that is why it is important to do your research to determine what works best for your particular business. It is also a good idea to enlist the help of a licensed broker or real estate agent to assist you in making the best decision to fit your specific needs.
Let’s go through some of the pros and cons of buying and leasing commercial real estate.
Buying Commercial Real Estate
- Equity in the property builds over time
- Increase in property value over time
- Potential rental income
- Tax breaks
- More control
- Upfront costs
- Difficulty of financing
- Loan prepayment penalties
- Capital loss and liquidity issues
Leasing Commercial Real Estate
- More liquidity
- Fixed monthly cost
- Tax breaks
- Greater flexibility
- No equity or appreciation
- No passive income
- Rent expense
- No control
Reasons buying might make the most sense for your business:
- Option to rent out a portion of the space as an additional source of income
- Opportunity to build equity in the property
- Ability to reconfigure the space
Reasons leasing might make the most sense for your business:
- Can move out at end of lease
- Money is not tied up in down payment
- More tax deductions on lease expenses
- Often not as much property maintenance responsibility
- Ability to get into a space that would be out of the question to buy
Read the full article titled, “Buying vs Leasing Commercial Real Estate: Pros and Cons of Each” on ValuePenguin by Lendingtree.
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