Should new companies rent or buy their commercial property?

On Behalf of | Jun 14, 2022 | Commercial and Residential Leases |

Location may not be everything to your business, but it sure is important – and that has many entrepreneurs wondering whether they should rent or buy their commercial property.

Honestly, there’s no “one-size-fits-all” answer. Weighing out the pros and cons, however, may make your decision a bit easier.

What are the benefits and drawbacks of owning?

If you’re still growing your business, sinking a ton of money into a commercial property right now may not be ideal. You could be creating liquidity and cash-flow problems just by coming up with the massive downpayment – and that’s if you can get approved for financing. Heavily investing in a property before you know if it will continue to meet your business needs as you grow could also be a mistake.

On the other hand, property builds equity, and your assets will appreciate over time. Meanwhile, you can make use of tax breaks on mortgage interest and other property-related expenses. Owning your property also gives you more control over what you do there.

Are there any benefits or drawbacks to leasing?

Leasing can be expensive, especially for a prime location, and your rent money isn’t building any equity or value for your company. You also have less control over what you do with the space – and it could always be sold out from under you.

The flip side, of course, is that you aren’t pouring a ton of money into the place at once, so that leaves you with more liquid assets that can be used elsewhere. Plus, you have the flexibility to move your location once the lease is up without the hassle of selling (or renting it to someone else).

Whichever route you decide to take, make sure that you have an experienced legal guide to usher you through the process. A mistake in your commercial lease or property purchase can be a disaster.