Should You Buy or Lease Your Next Commercial Property?
harkins / July 6, 2017
The choice of whether to buy or lease a commercial property must be carefully considered from many angles, especially if you are an entrepreneur planning on starting a new business. An entrepreneur or investor can make an informed and logical decision to purchase or lease by asking themselves the following questions:
Are You Planning Expensive Renovations?
If you are searching for a commercial property to open a high-end restaurant, for example, and plan to spend a substantial amount of money on the interior of the building, it would probably be a good idea to go ahead and purchase the property. Making extensive and expensive renovations to a rental property doesn’t make sound financial sense if you are not the owner. When you lease a commercial property, the future could bring unpleasant changes, such as a lease not being renewed or an uncomfortable hike in rent. If you must move from your present business location, the gorgeous interior and expensive improvements you paid for must be left behind.
Would It Make Better Financial Sense to Lease?
Leasing a commercial property can give a business owner a lot more financial freedom because of the reduction in cash outlay in the beginning. This method can be especially helpful in a business startup, where money may be tight and every penny counts. When leasing a commercial space, inquire if the landlord offers a ‘Build To Suit’ option for tenants, which can further assist you in saving startup dollars.
When leasing a commercial property, make sure to inquire exactly what improvements you will be allowed to make as a tenant. Also, find out if you will be financially responsible for removing any improvements made to the property during your tenancy if you decided to terminate the rental agreement.
What Are the Benefits of Purchasing Commercial Property?
Investors that purchase commercial property will realize several financial advantages over time. Collecting deposits and rent from tenants will provide good passive income for the investor that can be used to fund further real estate investments. Also, as the value of the property increases over time, your real estate investment will increase in value. Even if the property happens to decrease in value, it will usually not affect the price you charge the present tenants for rent.
Financing for a commercial property purchase may be difficult to obtain from traditional lenders, but an investor can investigate the possibility of such options as owner financing. If a property owner is anxious to sell, they will be more flexible concerning the price as well as terms.
What Is the Downside of Purchasing Commercial Property?
If lightning strikes or hail damages the roof of your building or mechanical or structural failures cause problems for tenants, an investor will be responsible for the cost of repair, which could be expensive. If tenants vacate the building for any reason it may take a long time to find another suitable renter and this situation may represent a substantial loss of income. It would be a good idea to have funds set aside to pay for such events so as not to disrupt your financial well-being. Saving the money for such events will ensure your peace of mind and enable you to take care of emergencies quickly and efficiently, enhancing your reputation as a good landlord.
Can I Obtain a Better Location by Leasing?
As a business owner, you will be concerned about locating your business where it will have a better chance of thriving. If prime real estate is out of your financial range to purchase, you can still lease commercial property in a desirable area for less money up front than buying that same property. Leasing a commercial property for your new or existing business can allow you to locate your enterprise in a prime location where you will enjoy a larger flow of traffic and sales. Sometimes leasing may be the only workable option for a new business.
Do I Want to Save Time and Effort?
Do you lead an ultra busy lifestyle? Are you unsure what amount of rent you should charge tenants for the leasing of your investment commercial property? Do you not want the hassle of dealing with finding tenants and keeping them content? Are you looking for the perfect location for your new business or investment purposes? You can hire a professional to do all of these tasks so you can sit back and relax.
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