Choosing whether to buy or lease commercial real estate may feel like a difficult decision but having the right information and tools can make it a whole lot easier. The decision is a combination of personal and business goals, current and future space needs, and financial and tax concerns. Having an experienced commercial real estate broker help you evaluate the options and choose the best strategy for your business is also key.
Some companies want to own their commercial real estate to have the opinion of equity appreciation, total control over their property, and potentially, a secondary income stream. While others may want more flexibility and less risk that comes with leasing commercial space.
CONSIDERATIONS TO EVALUATE
There are key differences between owning and leasing. Whatever decision you make should support your unique business strategies. Here are some of the key considerations to evaluate:
Risk Profile: Are you risk adverse or risk-tolerant?
Equity: Do you have and are you willing to commit the necessary money?
Debt: Are you willing to incur debt and other potential ownership costs?
Flexibility: How much space do you need now? Three (3) years from now? Five (5) years from now?
Control: How much control do you need? When you lease, you have control over your space. When you own, you have control over the entire property.
Operations: How will you manage the physical, financial, operational, and occupancy responsibilities of owning the property? Would you need to hire additional personnel to help you manage the property? Or would you rather just call the property owner/manager?
Opportunity Cost: When you own, some of your capital is tied up in real estate. Down payments can be anywhere from 10% – 30%+. Will you miss out on opportunities by not having access to capital for other investments?
Distractions: Do you want to be a landlord? Renting unused space may give you the opportunity to earn secondary income. But will this distract you from your core business?
Tax Advantages: There are significant tax deductions for both options. Owners can deduct any interest or depreciation on the property. Leasers can deduct the cost of the lease payments, property insurance, property taxes (depending on the lease type), utilities, and maintenance.
GET THE HELP YOU NEED
As you can see, the question, should I own or lease commercial real estate is complicated. One size does not fit all businesses’ needs.
Suburban Real Estate Services and our depth of experience can walk you through this important strategic decision. We can help you dig deeper into your needs by asking the right questions to help you look at your situation correctly and make a good decision. We can also help you find tax, legal, and financial advisors who will play a key role in your decision as well.
Contact us to get started with a customized consultation on your needs.
Since 1991, Suburban Real Estate Services has been helping clients lease, buy, sell, and manage commercial real estate. Let’s find out how we can help you.