Although there are varying benefits to leasing or buying commercial space in real estate, there’s one thing that matters irrespective of the choice you make: location. After all, what sense does it make for your consumer base to have to drive 50 miles for your services? Better to locate your business at a hub of a congregation – such as the downtown city district – or a more specific commercial space close to your clientele.
Assessing the Benefits of Purchasing Commercial Space
First and foremost, of course – it now belongs to you! Purchasing a business property can be quite satisfying, as the feeling of ownership is unmistakable. This rings especially true in times when interest rates are down and ownership equity makes more sense than paying rent to a landlord (for the real estate investor, at least).
Another point in favor of owning vs. leasing is equity ownership; this inevitably leads to greater knowledge of fixed costs such as overhead and mortgage rates. Consider the alternative lease contracts, which change due to a myriad of factors such as building improvements and amenities.
If your commercial space increases in value for any reason, you the owner enjoy this and can choose to pass some of the bounties on to your tenants in the form of building improvements (of course, rent usually rises as a result). You don’t have this option if you’re leasing the property.
Advantages to Leasing Commercial Space
One of the chief disadvantages to owning is a big benefit to leasing: what if the property value drops precipitously? If you’re leasing, then it’s much easier to simply vacate and move on; whereas if you own then you will take a big loss when you sell.
Similarly, when you lease commercial space, you aren’t committing nearly as many resources to the property; this means you’ll have cash available for other real estate ventures – and thus, be able to diversify your portfolio and mitigate risk.
There are a lot of reasons in favor of either position when it comes to commercial space; your available finances, level of commitment to particular aspects of the real estate venture, and risk tolerance will determine whether you buy or lease. For more info, feel free to check out Progressive Capital Funding.