Are you starting with a new venture? Are you in the dilemma of whether you should buy or rent an office space? Both buying and leasing a commercial real estate property has its own ups n down. As the owner of your business you should take all factors into consideration and decide which will best suit your need.
In this blog, we have compiled a well-studied review from both buying and renting perspective, which will help you make the right decision.
1. Cost factor:
Leasing a commercial real estate property does not require an investment of a huge sum initially. The landowner charges a security deposit which is almost equal to a month’s rent. Also, the brokerage fee is minimal. Thus leasing a commercial enables you to use the available cash for expansion of your business.
On other hand buying commercial real estate requires paying a huge sum as a down payment. Also the brokerage fee is quite high. But the biggest advantage of buying a property is that you build equity over time. This equity becomes collateral in future for expanding your business. And also serves as an asset after retirement, as you can sell your premises or rent it and enjoy a handsome passive income stream.
Above all after a span of 20 years or so the cost of monthly rental that you pay for leasing a commercial will work out to be higher as compared to the cost of purchasing the property.For commercial properties in Corpus Christi, you can get in touch with Cobb-Lundquist & Atnip Inc one of the top-notch Real Estate Company in Corpus Christi for all the best listings of Commercial properties available.
2. Occupancy in the desired location:
Leasing a commercial property gives you the option of establishing a business in a prospering area. You can maximize your profits by renting a property in well-established business centers with a minimum investment. The problem arises only if
- The landowner increases the monthly rent with respect to the prosperity of the area.
- The landowner refuses to renew the lease agreement.
In both the above scenarios you are then burdened with winding up your established business and restarting in another area.
While buying a commercial property the location choice totally depends on your budget. You may not be in a position of establishing your business in a prosperous area owing to the property price being too high. Thus you have to compromise on establishing yourself in a less thriving area. But, if the area prospers in the coming future you have an added advantage of maximizing your profits.
3. Repairs and maintenance:
Repair and maintenance of a property require both your time and money. Generally, the landowner looks after the repairs and maintenance work. But when you lease an office premise the landowner manages the maintenance part and saves you from the worry of doing it by yourself. Thus you can solely concentrate on your core business. However, the maintenance charges are usually included in the monthly rent as operating expenses also known as common area maintenance expenses.
As an owner of a commercial property, you are responsible for both repair and the maintenance cost. But if you have a large business premise, you can rent a part of it and cover the maintenance cost in the monthly rent.
4. Tax benefits:
If you are leasing a property you enjoy the benefit of deducting the entire monthly lease payment from taxes. Also, ongoing costs such as utilities can be deducted from tax payment thereby reducing your tax burden. Owner of commercial properties enjoys tax benefit of deducting the depreciation cost of the property. Also the interest that you pay on your property loan is deductible from the tax that your business owes.
5. Flexibility of movement:
Leasing a commercial property gives you the flexibility of shifting your business base. As soon as the lease period is over you can establish your business in your desired location having greater expansion opportunities.
On the other hand, owners do not enjoy the flexibility of shifting their business. Since the entire process of relocating is time-consuming. Right from selling the property to purchasing a new one in your required budget involves many formalities. Also if the property is purchased on the mortgage you cannot sell it until the entire loan amount is paid up.
The decision of whether to buy or lease your office space totally depends on your choice. If you are having sufficient cash flow and you are interested in building equity for future investment and security, buying a property is recommended. But, if you want flexibility and smooth running of the business with no worry of a maintenance issue than leasing is the best option.
We at Cobb-Lundquist & Atnip Inc. A Commercial real estate firm in Corpus Christi extend full support to our clients for leasing or buying commercial property suiting their needs.