If you're looking for a new space for your business, chances are you're weighing the pros and cons of buying vs. leasing. While young businesses may not have the resources to purchase a property, those that have been around a while can have an easier time obtaining a commercial mortgage. The question is: is this the right way to go? A number of benefits indicate it could be.
1. Buying lets you lock in a fixed cost
When you buy your office space rather than lease, you get the benefit of having a fixed cost locked in. When you rent your space, you run the risk of having your cost increased when your lease is up. With the right terms, you may even be able to get a monthly mortgage payment that’s lower than your payment would be if you rented.
2. Owning means you have a tangible asset.
When you own your office space, you have a tangible asset that you would not have otherwise. This is something that can be sold in the future, and it can also be used as collateral if you take out a loan or a business line of credit. If you want to purchase an additional location, it can be used as collateral for that as well.
3. You have a potential secondary revenue stream
If you buy more space than you need, you will have room for your company to grow into. In the meantime, however, you will have the advantage of being able to rent out your excess space to another organization. By doing so, you are opening yourself up to a secondary revenue stream that can help your business. If your primary source of revenue goes through a dry spell, the reliability of rented property can help alleviate the financial pain.
4. The value of your business space can increase over time
The value of your property may increase, depending on the real estate market. If you sell in the future, you can potentially make a significant profit by waiting for the right market.
5. Owning lends your business an air of credibility
By owning your business space, you're showing others that you are confident in your ability to stay in business for an extended amount of time. This can give your business an air of credibility and make people want to do business with you.
6. You don't have to answer to a landlord
Not all the benefits of owning your business space are purely financial. By owning, you're simply giving yourself control and the freedom to do as you wish with the space as long as it doesn't violate any laws. When you lease, you're at the mercy of your landlord who may or may not be on board with any changes you would like to make.
7. Selling your office space can significantly add to your retirement funds
If you hold onto your office space for the duration of your ownership of the business, you can sell when the time comes to retire and put those funds toward your retirement fund. While you should still have another retirement plan in place, selling your property can make a huge difference in the amount of money you have in your golden years to live the life you want.
If your business is doing well and is expected to continue, buying can be a more attractive option than leasing. Ask your banker about a commercial real estate loan or financing with the Small Business Administration.
