Should you buy or rent commercial space for your small business?

One problem that some business owners come across is running out of space. Whether your small business has outgrown your home or your current office space, deciding to rent or buy your next commercial property can be difficult. With advantages and disadvantages for both options, this is not a financial decision that should be made lightly.

Advantages of buying commercial real estate

Purchasing your commercial property can be an excellent long-term investment. Buying your office space includes other benefits, such as:

• Building equity

  Buying the entire property will give you complete ownership immediately. Having equity in your property will increase the total value of your small business.

• Increasing value

  Having ownership of a commercial property allows you to benefit from the value increasing.

• Renting out extra space

  If your business does not fully occupy your new property, you could consider renting to other companies. Renting out space will also give you another stream of income.

• Having control

  Owning a commercial space means being able to make changes to your office without having to speak to the landlord.

While there are several advantages to purchasing commercial real estate, it is imperative to know the disadvantages as well so you can make a decision that is right for you.

Disadvantages of purchasing your business property

Purchasing office space is not right for every business owner. There are hidden costs and risks that must be accounted for. Disadvantages of buying your office space include:

• Chance to lose value

  Because owning your office building is an investment, there is a chance the value of the structure could decrease. This could negatively affect your business in the process.

• Insignificant savings

  When calculating the cost of owning versus leasing commercial space, the savings might not be as significant as you previously thought. You also acquire responsibility for many other factors, such as building maintenance and taxes that need to be factored into the total cost.

• Liability risk

  When you own a building, you are responsible for any injuries that occur on the premises. To combat this, you will need to buy insurance for your property.

• Less time to focus on business

  The extra time it takes to deal with managing commercial real estate is time taken away from your company. You could have more time to focus on your business by leasing your property.

Contact your attorney before making your final decision. Your attorney can look through the advantages and disadvantages and make a recommendation suited to your situation.