Whether to lease or buy office space is a question for all budding small enterprises at some point. A small business owner must carefully examine the benefits and drawbacks of both options before making a decision. We’ve compiled a comprehensive guide to help you decide if you should rent or buy office space.
All about renting
If you haven’t yet located the perfect property to buy, or aren’t ready to commit to a purchase, renting provides a lot of advantages.
Advantages of renting
- You don’t have to put down any money at all—You’ll need to put down a significant amount of money when you buy property. However, a broker fee and a deposit equal to one month’s rent are the sole costs of renting. Your remaining cash can be used for working capital or expansion if you choose to lease your equipment
- Lease payments can be deducted from your taxes—Commercial property leasing payments and other rental costs can all be written off as tax deductions
- Repairs and maintenance should be under the landlord’s charge—Maintenance costs, repairs, and renovations may be covered by your landlord. This depends on how you structure your lease agreement. Here, it’s important to make smart decisions and create a lease agreement that works in your favor. You’ll be responsible for cleaning up after yourself for the most part. However, your landlord will be in charge of maintaining the building
- Renting provides the greatest degree of freedom—There is no long-term commitment to the location, square footage, or monthly price when you rent office space. If you don’t intend to stay in an area for too long, renting may be the best alternative for you. When you rent, you only have to worry about minor repairs and upkeep
- You can go bigger and better with renting—As we’ve heard from relocation specialists from relosmart.Asia, renting can allow access to higher-end properties for a lower cost. In an expensive neighborhood, buying a commercial property can be prohibitively expensive, so renting can be a great option
The disadvantages of renting
- When you rent a home, you don’t own it
- Over time, your rent will rise
- The rented property does not allow for the accumulation of equity—If you live in a highly sought-after neighborhood, your rent is likely to rise every time you renew your lease
How to make it work for you
Before signing the lease, have it reviewed by an attorney to ensure that you are appropriately protected from unforeseen or unreasonable costs or obligations. Ensure that the lease outlines the landlord’s maintenance responsibilities, including the building’s structural, plumbing, and electrical systems, as well as your own maintenance responsibilities, to avoid misunderstandings. Additionally, having a clear understanding of how to end your lease is essential so that you can give enough notice when you decide to leave.
All about buying
It’s important to look at both sides when deciding whether to rent or buy office space. Here are the pros and cons of buying.
The pros of buying
- Property is a terrific way to make money—This is because its value is almost certain to rise over time. Property can also be a source of additional revenue if you find it and purchase it for your firm. If an office is too large for the owner, he or she can rent it out to someone else.
- Future growth—You have to think in advance when deciding whether to rent or buy office space. Buying property allows for future growth and expansion in all the phases of a company’s development. It’s also great if you are looking to move your business to another country. Even though setting up a business abroad is a big feat, it’s going to be much easier if you have property secured.
- Financial freedom—Buying office space rather than renting on a monthly basis means being able to plan your expenses for years to come.
The cons of buying
To begin, commercial property purchases require a down payment, which may be anywhere from 10 to 25 percent of the total cost of the property. This can be a big amount of money to come up with all at once, especially when purchasing a large property. Not to mention the length of time it can take to buy commercial property. From the time you find it to the time it is completed, it can greatly delay your move. It isn’t the best option if doing this in a hurry or planning a corporate move on short notice.
And even while owning a property allows you the freedom to do anything you want to do with it, it also comes with a lot of responsibility: you’ll be responsible for the property’s upkeep, repairs, and maintenance costs. You may also be worse off in the long term if you ever need to sell to release equity because the selling price and time frame will rely on the market.
Tips for handling buying
- Employ the services of a local realtor well versed in the housing market—A successful business always starts with a successful office. So if you plan to buy, you should consult with professionals about the financial and legal issues involved.
- Investigate the available options in your region—Seriously consider your options before making a decision on whether to rent or buy. Buildings in your selected location have different costs and characteristics, so compare them. It might be more profitable to rent if the buildings on sale are old and need renovations.
Final words on whether you should rent or buy office space
We hope our guide has helped you decide whether to rent or buy office space. You have to be mindful of all your options and make the right decisions for your business. Good luck!