Buy vs. Lease Commercial Space

Here are some considerations to help you understand what you’re getting into with each option. Weighing them effectively will help you navigate this delicate decision to your business’s best advantage.

When should I buy?

If you want to build your personal wealth

Commercial real estate has been a great investment for many entrepreneurs in recent years. While there are no guarantees, owning can build wealth apart from your operating company.


If your current leasehold improvements are getting costly

If you’re investing heavily in your leased premises to run your business, it often makes sense to buy a property. If, however, the time isn’t yet right to buy, you may want to consider leasehold improvement loans to tie you over.


If you want to be free of landlord woes

With a leasing option you may be subject to annual rent increases​, interacting with a difficult Landlord or Property Manager​ and higher costs at the time when your lease expires.


However….

If you decide to buy commercial real estate, be sure to pay close attention to the following:

Cash flow and stability – Before you buy, make sure your company will have the resources to support this commitment in the years to come. Buying a building, after all, is a long-term investment.

When should I lease?

Here are some situations where it may make more sense to lease a space for your business.

If you don’t have enough working capital

Start-ups are often unable to commit a lot of capital to a building, so they will most likely opt to lease. Even if you have an established business, it may not be generating enough cash at this stage to allow you to fund both your growth and your commercial property acquisition.

If your business needs are unstable

If your company is growing rapidly or downsizing, or you’re just not sure what’s going to happen, you might be better off renting until the situation stabilizes.

You don’t want the hassle of owning

Owning a property comes with additional responsibility and potential problems. You may prefer to lease and focus on your business for the time being.

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Ready to talk further about your options? Let’s chat!

Contact Jerry LeBlanc