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Is it Better to Rent or Buy Commercial Property?

As a business owner, you have to make many decisions that will make your business better and more profitable. One of the most important decisions you will make is the location of your business and whether you should rent or buy commercial property. There are advantages and disadvantages to both options, so it is helpful to learn more before you make a choice. Many factors go into the choice. What is right for one business may not be right for another. Here are some things to consider when deciding whether to rent or buy commercial property.

Determine the Space You Need

Before you can choose to buy or rent commercial property, you will need to determine the size of the space you need. You will also want to know what portion of the space will be used for offices, manufacturing, storage, and storefront. It is helpful to know the square footage you will need for each particular function of your company. Once you know this number, add some additional space for future expansion. The last thing you want to do is buy commercial property that your business will quickly outgrow.

Location is Important

As with any property, location is one of the most critical factors. If you have employees, you will want to make sure that you are close enough to an urban area that is convenient for workers. If you sell from a storefront or have a restaurant, location is even more important. It is also helpful to be close to a major hub if you regularly ship products. It can be helpful to do some market research before you choose a location. It may be necessary to rent a space for a short period of time so you can better evaluate the area.

Leasing Commercial Property

Leasing commercial property makes sense for many business owners. If your company is new, you may want to take some time to ensure that your business is going to meet your expectations before you make a big purchase commitment. When you have a landlord, you likely will not be responsible for building repairs, which can be helpful. A lease allows you more flexibility because you can leave at the end of the term.

A lease does have some disadvantages. If the landlord does not renew the lease, you will have the expense of moving at the end of the term. Once you settle in, it can be more difficult to move, and you might have to renew a lease even when the price rises. When you have a lease, you do not own the property, so you cannot take advantage of the tax incentives offered for property owners.

Buying Commercial Property

When you purchase commercial property, you will have more control over the building. You will immediately begin to gain equity in the property, which will likely increase over time. There are a variety of tax advantages that you will have when you purchase commercial property. You can establish your company in a particular location and know that you will be able to remain in place as long as you like.

Owning a commercial building means that you have to pay the expenses that crop up for repairs, maintenance, and upgrades. If your business expands, you may outgrow your building. You will need a large down payment, which can tie up your financial resources. If you default on the loan, you could lose your business.

The decision to lease or buy commercial property is different for everyone. You will want to carefully weigh all the factors before you make a decision. For legal assistance, contact our experienced business attorneys at Moen Sheehan Meyer, Ltd. at (608) 784-8310 or online.

Published January 23, 2023
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