Should You Buy or Lease Commercial Property?

At Northwood Mortgage, we understand how small business owners just like you are faced with dozens of questions every day that can make or break their entrepreneurial dreams. Among the most important decisions you must make is choosing whether to buy or lease commercial property. This article will help you make that decision by highlighting the various advantages associated with each option.

What are the Benefits of Buying?

Small business owners understand better than anyone else the importance of controlling where and how they work. When considering whether to buy or lease a commercial property, it pays to keep these benefits front of mind.

Is your business strategy focused on building equity and long-term growth? Then you may want to prioritize purchasing, rather than renting, commercial property. Though it can often be the more expensive of the two options, purchasing allows you to control the property on which your business operates fully. In practical terms, this means no longer answering to landlords and other entities who do not work for you but who nonetheless draw an income from you.

Purchasing commercial property not only gives you more than authority and autonomy, though; it also gives you options for keeping your business afloat. If your business begins underperforming to the point of needing a bailout, owning commercial property provides you with two key options. You can either sell the property outright and use the funds to recoup losses, or you can rent the property out and use the additional income stream to continue financing your enterprise.

Ultimately, the decision to purchase commercial property should be informed by the kind of business you manage. However, the ongoing pandemic has demonstrated that various companies can thrive. At the same time, employees work remotely. The widespread desire to return to offices has reminded us that work and home life are best kept apart. If it makes sense to own private property, like your home, it makes sense to own commercial property, like your office, too.

What are the Benefits of Leasing?

While there are many benefits associated with owning commercial property, renting can be just as advantageous. When making your decision, there are many factors to consider.

Is your business still in its early growth stage? Then you may want to hold off on purchasing commercial property and rent instead. What you lose in the tangible benefits of ownership, you gain in the intangible benefits of renting. As an entrepreneur navigating the choppy waters of small business ownership, flexibility should be one of your the ability to pick up and move your business to larger or cheaper or more versatile commercial spaces when the opportunity arises.

If capital is tight and economic conditions are uncertain, you have even more reason to continue renting. Most small businesses do not last longer than five years. Their reasons for failure are many, but they often boil down to just one ever-important point – money. As a small business owner, it is incumbent upon you to ensure your business remains solvent, even if that means delaying plans to purchase commercial property.