Should I buy or lease my business location?
That’s a question most business owners will need to consider, but there’s no single answer that is right for everyone.
Buying and leasing have advantages and drawbacks and you’ll need to decide which option might be best for your circumstances and the future of your business.
In the best of all worlds buying could be great in the long run. A fixed mortgage would keep your payments the same throughout the life of the loan, the property would increase in value over time and you wouldn’t have to worry about rent increases or limitations put on you by a landlord. Purchasing property would also mean you and your customers can settle in for the long run, and you’ll always have the option to sell it and use the money for things such as retirement. And if the building is yours, you’ll be able to lease any unused portion, which could bring in additional income.
Owning your business can also have drawbacks. You’ll have to commit a chunk of capital toward a down payment, commission and closing costs, and you’ll be responsible for any maintenance and property improvements.
Leasing a location can offer lower initial costs because your down payment might only be a deposit that equals a month’s rent, but you could also become captive to things like annual rent increases or the loss of space if the building is sold. Without the need to commit to a big down payment, as in a purchase, it might leave you more money on hand for things like inventory and marketing.
When you lease, it’s likely the landlord will be responsible for big maintenance items such as air conditioners, lot maintenance and other costly items. But even factoring in some of the pluses, you’ll never own the property if you lease.
When trying to decide what would be best for your business, take the time to weigh the options and talk with your attorney or accountant about tax benefits or financial drawbacks to each.
Be sure to analyze whether buying or leasing would work best for the short- and long-term needs of your business. Then focus your time on making the business as successful as possible – whether you own or lease the location.