If your small business is growing or your lease is up soon, you’ll need to decide whether to rent or buy your new office space.
The rate at that your business is growing, and the local economy all play a crucial part in your decision-making process. But if you’re feeling stuck, it helps to learn more about renting vs. buying and the pros and cons of each.
Keep reading this guide to learn everything you need to know about renting vs. buying your new office space!
Renting Office Space
Renting office space gives you a lot more flexibility as a business. Most commercial property leases are anywhere from 5 to 10 years.
During the lease, you’ll be able to use the property for your business. However, this may be subject to specific restrictions in your lease agreement.
Pros of Renting
One significant advantage of renting office space is renting in a prime location near popular restaurants and retail stores. In this case, renting is much more affordable than buying a property. You’ll also be able to establish your business in a desirable location that you couldn’t afford otherwise.
With renting, you don’t have to stay at the location longer than the lease term. Flexibility is essential if your office needs will change in the near future.
You’ll also have more money for your business since your money won’t be tied up in real estate. In addition, as a business owner, you can get tax breaks on your rent and utilities.
Cons to Renting
The most significant con to renting is that you won’t build any equity. You also don’t have any control over annual rent increases, so you could be looking at higher monthly costs by the time your lease ends.
You might also have to deal with a difficult landlord.
Buying Office Space
If you want to buy commercial real estate, you can either finance it or pay cash upfront. Buying allows you to have complete control of the property.
Pros of Buying Office Space
The number one pro of buying commercial real estate is the equity you can build in the property over time. You can use this equity as collateral in other business loans you may need in the future.
If you have extra space in the property, you can rent it out and add to your monthly revenue. Other pros include:
Steady mortgage payments
Your interest payments are tax deductible
You can make structural changes to the building
Can add to your retirement savings when you sell
If you’re looking for office space for sale, you can view this site for more information.
Cons of Buying
When you buy office space, you won’t have as much flexibility. This can pose problems if your business grows rapidly and you outgrow the office space. You’ll then be forced to sell the property.
You’ll also have more upfront costs when you buy a commercial building, like appraisal and maintenance costs and a down payment.
You might also need to pay for property improvement costs if your building needs upgrades that can’t wait.
Renting vs. Buying a New Office
Now that you know more about the pros and cons of renting vs. buying a new office, you’ll be better able to make the best decision for your business.
Do your research in the area you’re considering for your new office space. Also, talk with a financial planner or tax accountant to get professional advice.
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