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Should I Rent or Buy a Building for My Business?

The right commercial space is essential to the success of your business. Whether you are just starting out or already have a company, one of the most important considerations is the building that houses your business. Your business may require a storefront, warehouse, factory, office, and other areas that meet your needs. You have two main options when it comes to the space for your company. You may choose to lease a space or purchase the building that will house your business.

You may wonder whether it is best to lease the space or purchase a building for your business. The answer depends on a variety of factors and is a choice that is unique to your specific company. An experienced attorney will help you make critical choices and assist you with the purchase or rental of your commercial space. There are advantages and disadvantages of both choices.

Pros and Cons of Leasing Commercial Space

Leasing is one of the most common choices when you choose a space for your business.

Leasing advantages

  • Flexibility
  • Monthly costs are fixed
  • Does not tie up assets in property

Leasing disadvantages

  • No equity in the building
  • Fewer tax breaks
  • Less control

Commercial leases may be longer than a year and are often five to ten years in length. When you lease a space, you do not have as much control over the property as you would if you owned it. If you want to purchase a building you will need to provide a down payment and will have significant ongoing expenses. A lease gives you more flexibility to move or expand depending on your future requirements.

Pros and Cons of Buying a Building

There are several advantages and disadvantages to purchasing a building for your business.

Purchasing advantages

  • Build equity
  • Tax advantages
  • More control

Purchasing disadvantages

  • Less liquidity of assets
  • Upfront payment required
  • Need to qualify for a loan

Buying a building may be a good option, especially if your business is well established. When you purchase a building, you will be making a long-term commitment that can be difficult to change later. You will need to know that you will have the financial resources to pay the loan. Owning a building gives you more control since you can design the space in a way that best suits your needs.

Deciding to Rent or Buy a Building

The decision to rent or purchase a building is one that you should make only after you review all of the many considerations. If you are just starting a new company, you may not know what your needs will be as your business grows and expands. If you do not have many financial resources you will have to come up with a down payment in order to purchase a building and might have to pay a high interest rate. Leasing a space makes sense when you are unsure as to the location of your company and do not know the specifics of the space you will need later.

Buying commercial property can provide you with a stable location to house your company. You will not need to worry about rising rent rates or whether you could lose the space and be forced to move. You will have complete access to the building and can make changes as you desire. You may also be able to rent out a portion of the building that you are not using.

It is helpful to meet with an attorney to discuss buying or leasing commercial property for your business. To learn more, contact our legal team at Moen Sheehan Meyer, Ltd. at (608) 784-8310.

Published May 31, 2022
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