A business is all about making informed decisions at the right time- one of the crucial decisions you might need to make is whether to purchase or lease a property for your business needs. Although there is no fixed rule or ‘the right thing’ to do as all businesses have their own specific needs and requirements but you still need to consider a few things before making this decision. While business owners are always looking out for ways to control their expenses and promote business growth, there are benefits and potential risks associated with both the options. Let’s ponder over the pros and cons of buying and renting a business property to enable you to choose the one which fits your business goals.
Buying a Property
- An appreciating asset on your name- Investing in a commercial property can be promising as it is an asset that appreciates over time.
- You can sell it whenever required- If you feel that you are unable to keep up with your growing business or you need additional investment, you can sell it for a good price.
- Freedom of owning a property- You will be having complete control over your premises and you can set it up however you like without the intervention of your landlord.
- Finance can be managed with loans- You can apply for a mortgage loan to finance your property, which means that you only have to pay a monthly amount as you would if you were to lease a property.
- Can rent out additional space- If you have some extra space which you will not be requiring for your business operations, you can easily rent it out to get some additional income.
- High upfront cost- Buying a property usually involves paying a hefty upfront cost that significantly reduces your capital to invest in your business. This can cause your business to suffer and restrict cash flow.
- Lack of flexibility- Businesses grow over time and you might need to move out for various reasons for your business to prosper. You will be tied back and will be unable to change the location.
- Maintenance and setting up costs- In addition to the upfront payment required, you will have to spend on the maintenance of your property as you are the owner.
- Capital lost if sold at the wrong time- You might lose out a huge amount if you sell your property in the time of need at the wrong time. Property matters tend to be sensitive in this regard.
Renting a Property
- Provides you flexibility- By renting out your business place, you give yourself the flexibility to change locations whenever necessary due to growing business demands.
- Can concentrate more on business growth- Since you know your fixed monthly costs, you will be able to invest the rest in your business to promote its growth.
- Less risk- When you are starting out, renting out can be feasible as it does not tie you down to any long-term financial commitments.
- Prime location- A greater choice of properties will be available for lease at good locations which will suit your business needs which might not be available for sale.
- Limited control- This option does not guarantee control over the property as the owner can sell it and decide to utilize it for himself which can impact your business.
- Rents can be fluctuating- Increasing rents is a major concern which is faced while renting out a property for business purposes.
- Paying off someone else’s mortgage- It can be extremely dissatisfying for you to pay off someone’s else mortgage while you could utilize this money to pay off your own property bills.
The demands of every business differ from each other, as well as the situation of business-owners. Hence, you should opt for an option which gives you control and provides more flexibility for your business to grow.