12 May Buying vs Leasing a Commercial Unit
If your business has grown to a point where you need office space, you might be considering whether you should buy or lease it. There are advantages and disadvantages to both (as with most things in life), and there are certain situations where one option makes sense over another. Let’s take a closer look at when it makes sense to buy and when it makes sense to lease a commercial unit.
When to buy a commercial unit
Buying a commercial unit is obviously more of a commitment, both financially and time-wise. A good rule of thumb is that it makes sense to buy commercial space if you plan on staying put for at least seven years. That’s the point where you start to break even.
It might also make sense to buy a commercial unit if it’s in your exact desired location. You might want to lock it in at a rate you can afford to secure that location for the long term.
Other benefits of buying commercial space include:
- Total control: When you own space, you can do whatever you want to it. Paint it, tear down walls, install skylight windows—the sky’s the limit when it comes to creative control of your space.
- Ability to rent it out: If you buy a commercial unit that has more space than you need at the time, you can rent part of it out to make up the extra cost.
- Asset: Owned property is an asset, so owning commercial property can help you build wealth. You can benefit from having an appreciating asset when you buy rather than lease your commercial unit.
When to lease a commercial unit
There are a lot of good reasons to lease a commercial unit. If you’re just starting out and aren’t sure you want to stay in the same space for seven or more years, then signing a lease gives you the freedom to move if you decide you’d be better off in a different location.
Leasing a commercial unit also costs significantly less upfront. You’ll generally have to make a down payment of anywhere from 10–40 percent of the value of the property plus closing costs when you buy it. When you lease it, though, you’ll only have to pay for an inspection plus any applicable fees (attorney fees, inspection fees, broker fees, etc.) on top of your first monthly payment.
Other benefits of leasing instead of buying commercial space include:
Simplicity: As a renter instead of an owner, you have a lot less to worry about when it comes to things like insurance and maintenance. Your landlord will handle all of that, so you can spend your time on your business instead of property management.
Easier budgeting: When you lease a property, you know what you’ll be paying each month. When you own, you have to keep money set aside for emergency maintenance fixes and other unknowable expenses.
Flexibility: Leasing space lets you figure out what does and doesn’t work for your business when it comes to commercial space. You can take a risk with location and simply move when the lease is up if it turns out that location wasn’t ideal.
If you’re looking at commercial property, feel free to reach out to us to see how we can help you decide whether leasing or buying makes more sense for your business.