Which is the better option when you’re looking for a home for your business? Should you look to real estate financing and try to purchase the facilities? Or is it better to lease? That depends a lot on your business, right now, and its current needs. Leasing brings a variety of benefits for companies needing immediacy, service, and a fast path to a return, but the long-term benefits of property ownership do tend to balance out the increased risk that comes with commercial real estate investment.
Advantages To Leasing
You should think of a lease as a business expense. It covers the access you need to resources, and it’s as useful as your ability to make money above and beyond its costs. That makes it a cost of your regular operation and not an asset you need to worry about paying taxes on. As a result, it simplifies your business and allows you to see a straight path to profits when you don’t have a lot of extra capital to tie up. This is especially advantageous for new companies, who often need to take the shortest route possible to positive earnings. There often comes a time when the balance changes and companies find it advantageous to dig down and work out a plan for purchasing a building or a parcel of land for construction. So when is it a better idea to purchase commercial real estate?
Benefits of Ownership
Owning a piece of real estate means you gain the benefits of its appreciation when you improve it, but that also means you assume the risk if the value declines. That means dedicating a significant portion of your income to maintaining the premises. Ownership also means you assume the tax liabilities, but there are a lot of advantages as well. Once the building is paid off, your overhead goes down significantly, allowing you to operate as a much leaner business. You also have the ability to use the equity in the property as a source of financing when you need capital. More than a few companies also look to purchasing multi-storefront commercial real estate. That choice provides additional income from renting the extra spaces while bringing all the benefits of property ownership for your business.
Making the Choice for Your Business
There’s no clear winner when choosing a path to accessing the commercial real estate you need to open your doors and begin doing business. It’s more a question of the right choice for your company today. Do you have the capital to put 20 or 30% down on a property? Or is it time for a turnkey-ready solution?