Unless you are well ensconced in your garage or extra office space at home, one of the most challenging concern growing businesses has to contend with lies on whether to buy or rent an office space. For small business owners, the idea of either leasing a space or buying an official headquarters can be perplexing. There are just too many factors to consider vis-à-vis the long term goals and financial sustainability of the company. To give you an idea, here are some of the notable pros and cons between buying vs. leasing debacle that continue to puzzle even the most seasoned of business minds.
Why Buy?
While it is easy to choose buying a house over leasing one, it cannot be said the same to an office space. For one, you need to understand that this means lack of flexibility in your current space. Your business will be “tied-up” to the current location making it harder to expand when the need requires so at a later time. Of course, this also entails coughing off a big chunk off your capital for the down payment, improvement, and maintenance costs.
However, buying also comes with astounding perks. For one, it allows you to have a clearer perspective on your fixed costs. Keep in mind that office rental usually increases year after year. Mortgage interest and property taxes also provide hefty tax deductions thereby, increasing your “income” potential. Take note also that real property rarely depreciates allowing you to have a solid investment for the future or as a retirement fund.
Why Rent?
Many startup businesses and small-scale entities prefer leasing or renting an office space over buying to give them more flexibility. Not only does renting allow them to be flexible in terms of image and location, renting also allows them to covet prime property in a more affordable way. Basically, one does not have to shell out huge capital investments that only get tied up to idle asset like an office space. Subsequently, this also allows them to simply let the business grow first and then, be able to move from one prime location to another as they thrive.
But while the option may seem perfect for up and starting businesses, leasing also have notable disadvantages. Remember that lease increases annually and if your business does not take-off as planned, such cost may be too much of a burden. Leasing does not also assure you long-term hold on a strategic location. Often, some landlords tend to toughen their agreement once they see potential in their property.
The Verdict
So, should you lease or should you buy an office space? Again, it all depends on your long-term goals as a business entity. Often, one’s decision will involve not just strategic location but also tax, financial, and personal reasons. Do take note that the surge of rent-to-own office spaces is fast becoming the trend these days. With the help of a financial planner and broker, finding the best deal may give you the win-win situation you want.
