Should You Purchase Or Lease Property For Your Small Business?
If you've finally decided to make the leap from a home-based business to a storefront operation, you may be scouting out potential business sites and boosting your social media traffic in anticipation of your big move. A location can often make or break a business, and investing too much (or too little) in your location could handicap you before you're even off the ground. Which options will help you preserve your startup costs while giving your customers the convenience they value? Read on for some of the factors you'll want to consider when deciding whether to enter into a lease with a commercial landlord or purchase your building outright.
Is leasing a better financial decision?
Leasing is generally much more affordable for a new business owner with potentially limited funds, as you'll be required to pay only a monthly rent and deposit. Your landlord will likely take care of most exterior maintenance (like clearing snow from the parking lot or trimming back hedges) as part of the lease agreement. However, most commercial leases have a fairly long term, as landlords don't want to take the risk of a vacant property or frequent renter turnover. This means that even if your business closes, you'll still be on the hook for months (or years) of lease payments until your lease expires.
While apartment renters can often mitigate early lease termination costs by finding a new renter to take immediate possession, this isn't always an option for commercial leases. Your landlord may have veto power over tenants you select, and by exercising this power, hold you to the original terms of the lease. It's important to read any lease documents carefully before signing to ensure you don't bite off more than you can chew.
When should you buy commercial real estate for your business?
Buying, while initially more expensive than leasing, may provide you with a bit of a backup plan if your business fails to produce the revenue you expected. If you purchase commercial property in which to establish your business, you'll be able to sell it (or lease it) after vacating the space, potentially recouping your purchase price or even enjoying a gain. Purchasing commercial property can also provide your business with some generous tax incentives, helping lower your out of pocket cost.
However, doing so may tie up a great chunk of your business's assets at a time when expansion is important. You'll want to carefully weigh your ability to purchase in the more highly-trafficked parts of town and may need to spend a bit more time saving up (or raising) overhead funds before making this move. Visit http://sgcityrealestate.com/ to learn more.