Leasing vs. Buying Commercial Property: What’s The Right Option?

September 10, 2022
December 30, 2022
Leasing vs. Buying Commercial Property: What’s The Right Option

According to the Small Business Administration (SBA), nearly 50% of startups commence their operations from home. However, running a business from a residential property becomes challenging once the initial establishment phase is over. 

Why? It is because as the operation expands & demand rises, the “supposed” spacious home starts to feel confined and hampers the day-to-day working. 

As a result, entrepreneurs begin to wonder;

“Should I buy or lease a commercial building?”

If you are sailing in the same boat, you’ve come to the right place. In this article, we’ll discuss the perks of both options so that you can make a well-versed decision. Let’s begin 

Top Reasons Leasing Commercial Property Is The Right Option

Commercial property leases typically range between three to five years. According to the professionals at Troika Developments, the lease contract depends on the project type, amenities provided, and property locations. Nevertheless, it provides you with opportunities to recoup the investment. 

However, that’s not the only benefit of leasing. Read on to know more 

  • Fixed Annual Leasing Cost: It aids in saving money on regular repair & maintenance costs and upkeep of the property. You only need to pay a fixed cost stated in your leasing contract, and that’s all. So, if you have restricted finances, this is an ideal option. 
  • Tax Breaks: IRS allows tax deductions of the entire lease payment and property insurance, utilities, property taxes (depending on the lease type), and maintenance. Thereby. You’ll be able to save on revenue. 
  • Improved Liquidity: As there is no down payment involved in the leasing contract, cash management becomes pretty easy. Apart from the negotiated rent, upfront attorney fee, and security deposit, you can utilize the company finances for other purposes. 

Reasons Purchasing Commercial Property Is The Right Option

Purchasing a commercial property is a long-term investment. As long as you pay attention to property management, you can reap ample rewards. Some of them are listed below: 

  • Build Equity: It is the most obvious perk of commercial real estate investment. It does not matter whether you finance the property with a down payment or pay all cash; it will build equity. At the time of sale, you can get ROI by earning more than the property’s market value. 
  • Rental Income: To avail the ownership of a property in the eyes of the law, you need to buy 5o% or more shares. However, it is not necessary that you’ll use the entire premises for your business. That means you can rent the available space to earn rental income or create a secondary income stream. 
  • Asset Appreciation: Over time, the value of real estate investment increases. If your office is situated at a prime location and provides unique amenities, its value will appreciate with the improvement in market conditions. 

To Sum It All Up

Whether you should rent a property or purchase it depends on your business requirements and future prospects. Both options are viable and empower you to streamline the company operations from a “base office.” Remember that whatever decision you make must help lower your company hassles. 

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