Office Space: Is it Better to Lease or Buy?
If you’re like most people, when you think of McDonald’s, you think of a fast-food chain- but the truth is, they own some of the best real estates in the country. This company realized very early on that the biggest money was not in hamburgers- but in purchasing choice properties.
The company would then build a restaurant on the property and lease it to the franchisee who would run the restaurant and pay rent to the corporate office. This is the same model that is in effect today.
Most small business owners can’t afford to purchase office space when they’re just starting, instead, they opt for leasing office space. Unfortunately, this ends up significantly eating into their monthly budget. However, money is not the only reason to opt for leasing office space instead of owning it.
To decide whether it’s best to purchase or lease office space for your business, let’s look at the three major advantages of each option.
Advantages of Leasing Office Space
The advantages of leasing office space are as follows:
No down payment is required. When you purchase property, you usually have to come up with a down payment, which can take a giant chunk of your cash reserves or start-up budget. When you lease, you can take that capital and invest it in growing your business and leaving open the option to buy in the future.
Repairs are handled by a property manager. When you purchase a property, you are in charge of the maintenance. However, if you are leasing office space and the AC breaks, you can call the property manager and wait for them to fix it.
Short-term options are available. Chances are, as your business expands, you will grow out of your space. If you sign a lease of 1 to 5 years, you’ll be able to move to a new location as needed. Additionally, leasing office space provides you with the chance to test a new area of town to decide if it would work for your staff and your clients.
Advantages of Purchasing Office Space
We looked at the advantages of leasing office space, it’s only fair to look at the advantages of purchasing office space as well:
Real estate is an investment. As many companies have learned, real estate is an investment that will pay off over time. Sure, the property does tend to depreciate (decrease in value)- but it may also appreciate (increase in value) over time as well. You may be able to buy low and sell high after a few years.
You may save money in the long run. Sure, purchasing property can put a strain on your budget at first- but it can also give you the option to refinance later and eventually pay off the mortgage. Once you pay it off, you won’t have to worry about making payments anymore.
You have control of the property. When you own the property, you are the landlord and can do whatever you want to the property. If you want to do some updating or remodeling, you don’t have to worry about asking for permission. This may be helpful as your business evolves.
One of the first questions that come up when starting a new business is whether purchasing or leasing office space is best. Of course, both have several advantages. You just have to figure out which one fits best into your budget. Contact Masters Commercial Capital Group for your business financing needs.