If your business has been doing well but your present lease is almost expiring, then you might consider purchasing a commercial space instead of leasing. And with the low mortgage rates many merchants are now looking to have their own business premises hence creating ownership equity. However, there are a lot of factors to consider when making the decision to lease or buy.
Just as is with your home, location is an important factor to consider. If you are relying on a customer base located in a given area in town, you’ll need to continue running your operations near your current location. As a result, you’ll be forced to lease commercial space in the area because you may not find space to buy. Shifting to a new location may reduce your customer base.
In case you need to move from your current location to another, then owning a commercial space can be a main setback. Poor business conditions, changes in the locality, or increase in local taxes may make selling you commercial premises very challenging.
Then again, if you are lucky enough to buy a building in a growing area, your property may significantly increase value in future.
Business Stability and Fixed Overhead
Since mortgage rates have been constantly dropping unlike the ever fluctuating leasing costs, owning a premise gives you a rough idea of your future costs. Owning the property means you have a fixed overhead for the mortgage span.
Businesses that utilize bulky and expensive to move machinery like a countertop atm machine will enjoy stability if the merchant owns the premise.
Conversely, leasing costs depend on factors like increasing demand, upgrades to the building among other factors. Moreover, you can never be so sure of renewing a lease under the same terms if your lease period runs out.
On the other hand, renewing an existing lease can favor you during low demand and low occupancy seasons. Such scenarios allow you to negotiate favorable lease terms e.g. lower rates, upgrades and longer lease periods with your landlord.
Do You Want to be a Landlord?
Renting a commercial space means all costs e.g. taxes, security, insurance, maintenance and repairs, etc. are catered for in the lease agreement. Purchasing a property however means all these costs become your responsibility. That’s why you need to compare the cost of owning versus that of renting.
Being the owner of the property you can come up with a maintenance budget to carter for major repairs and refurbishments. On top of that, you can rent out any extra space and earn additional revenue. However, handling tenants can be tedious and time wasting, and a slow economy makes the problem even worse.
With the above guidelines, you can compare to see what works to your advantage—whether it’s leasing or purchasing. This way you can make the right decision and avoid hiccups in future.