Leaser vs. Buy of commercial property, Part 1

The age-old question, what is a better investment, leasing or buying property? At first blush, you might think purchasing property is the best investment. You secure long-term control, and your business gains an asset. But, leasing a property allows you to deduct the lease payments and greater flexibility in case you need to relocate operations. This post will go over the pros and cons of leasing and buying.

As a business grows, it is confronted with the inevitable choice of a lease or purchase their commercial space. Under either scenario, you acquire the right to use it, which is important for your business. But you should also be concerned with the long-term implication of your investment.

First, this post will discuss the factors that favor leasing a property; a follow-up post will discuss the factors that favor purchasing the property.

Leases are ideal for companies that are experiencing cash flow or crunch issues. When you acquire a commercial space for lease, you only need to pay the security deposit and first months rent so that you can begin operations right away. Additionally, leases are ideal for companies that don’t have a strong credit rating and are thus unable to secure favorable mortgages.

Leases also reduce the maintenance cost because the landlord must handle all major repairs. Of course, that also puts you at the mercy of another company to do their job and keep your workspace operational. Additionally, leasing is favorable if you find an ideal location but the property is located in an area that is losing value, so you don’t want to invest in it.

Additionally, lease payments are deductible business expenses. Finally, as stated above, your business is more mobile, so you can relocate as needed.

If you are reviewing your options to acquire commercial property, you may want to contact an attorney. Real estate investments stick with your company for years, sometimes even decades. You don’t want to buy into or lease a space until you fully understand the implications of the property. A lawyer can help clarify your choices by running you through a variety of outcomes to illustrate possible results. The more you understand the deal, the better you can make it.