Should You Buy or Rent Commercial Real Estate?
If you own a business and you are trying to decide whether you should buy or rent commercial real estate, it is time to compare the pros and cons so you can make the best choice. Deciding to invest in real estate is a big step that not all business owners should be ready to take. If you rush into buying real estate and your business is not stable enough, you may have problems managing the payments and maintaining the building. If you rent for too long, you are paying into someone else’s equity. Review the advantages and disadvantages of each scenario so you can make the decision that works for your business.
Renting For the New Business
Renting commercial real estate is the best option for business owners who are moving out of the home or who have just opened their doors. In fact, if you own a small business you want to prepare to rent for at least 2 to 5 years as you expand your book-of-business. More than 80 percent of all new businesses fail within the first two years. When you rent, you have peace of mind in knowing you do not have to bother with the space if you do not succeed in the competitive environment.
Other advantages of renting include:
* Low capital required for security deposits
* Maintenance is performed by owner
* You can expand by changing locations after your lease
* Lower insurance costs
* Less responsibility
While there are advantages, there are also disadvantages to renting. If you have enough capital set aside to buy, you should make the leap so you can pay into the equity of your own property. When you rent, you also cannot earn profit by renting space if you relocate or shut your doors.
Buying for the Experienced Business
If you have reviewed your Profit and Loss statement and you always profit, it may be time to invest your earnings into commercial real estate. When you buy real estate for your business, you have a say in what changes you make and all of the payments you make are benefiting your business long-term. You are not throwing away money by renting and you can rent additional space when you choose a property that has extra space.
Some disadvantages of buying include:
* The need for deposits
* Strict guidelines for loan approval
* Risk in the market
* Added responsibility
Now that you know the benefits of each, you can decide if buying or renting is best. Consider the health of your business and what the future looks like before you make your choice. Once you do that, review trends in the market and buy at a right time when you are ready.