At some point, small business owners have to decide whether they are comfortable with the space they have or need to purchase or lease office space. Making such a decision is not easy. As such, the owners have to consider the pros and cons associated with buying or leasing office space.
In this article, we give you the pros and cons of either of the two, making it easier for you to decide whether you should lease or buy office space.
The Pros of Buying Office Space
Investing in real estate is always beneficial. If you decide to buy office, you can lock in the commercial mortgage over an extended period, giving your business a fixed and clear cost. You will also benefit from the tax deductions that you will be eligible for from the interest paid on the mortgage, property taxes. Owning the office space will save you some money compared to rent the property. Most importantly the office space purchased will appreciate over time, giving you the option of disposing the property and funding your retirement.
The Cons of Buying Office Space
New businesses can experience unexpected requirements in the near-term. The office space purchased may soon become inadequate for your requirements. Purchasing commercial space will also increase the initial costs. The costs of the property, appraisal, maintenance, and a large down payment will all burden you.
The Pros Of Leasing Office Space
Leasing office space will provide you with an opportunity to have your business located in a prime location. If the business is depending on location and image, leasing office space is better than owning one. Leasing space instead of buying it will also free up working capital, allowing the business to respond to opportunities within the market. Also, you will not have to borrow the funds required as you would if you choose to purchase the office space. Ownership of property also brings along a set of problems, which will not be the case when you lease the space. Therefore, you will be free to concentrate on the business.
The Cons of Leasing Office Space
When you decide to lease office space, you are exposing yourself themselves to the risks of variable costs because the rent charged will increase when the lease expires. You also face a disadvantage because you have no equity in the property and will, therefore, need to set money aside for your retirement.
The decision on whether to buy or lease office space is an individual one and does not offer a clear-cut option for small business owners. What you decide will depend on a combination of financial, tax, and personal issues. You should discuss with your accountant or financial planner to get the best advice.
You can also set up a mobile office to enable you to work from any place. The primary office space can be a traditional home office while the mobile office will enable you to stay in touch with the business even when they are required to move out for whatever reason.
