The decision to lease or buy commercial space property often depends on how much working capital you possess; basically, is your cash flow significantly positive enough – or do you need to look into loans and leasing? When you buy, you are taking it off the hands of the seller; it becomes your property fully once any loans used in procuring it are satisfied. When you lease, you are basically renting it as a tenant. This can entail either leasing until you have no need of it anymore, or leasing in a rent-to-own scenario.
The Leasing Option
There are many benefits (as well as some detriments) to leasing commercial space property. On the plus side, it’s much cheaper since you needn’t concern yourself with downpayments. Furthermore, it turns out that the rent associated with a property lease is significantly more affordable even in commercial space markets with heavy competition – such as California or Texas.
Leasing property usually affords tax breaks that are absent with purchasing it outright. Several aspects, such as energy bills, can be deducted along with the monthly rent, itself. The ability to move on after the conclusion of the lease (assuming it is not a lease-to-own agreement) cannot be understated, either. As for the drawbacks, you may be wary of hikes in rent and property upkeep costs.
Buying Commercial Space
The chief benefit of buying property outright is the fact of full ownership. Even if this isn’t the case at the outset, you can watch your equity grow as you pay off the loan. They’re not building any more land, so real estate is one of the investments that cannot but increase in value over time. The added benefit of text-deductible property depreciation can make a significant dent in paying off the principal – although it would have no effect on mortgage payments each month.
Of course, the obvious detriment to buying office space or commercial space property outright is the big upfront cost. Furthermore, costs are ongoing since you have to maintain it, and when coupled with the relative lack of flexibility makes leasing a viable alternative for many.
To learn more about financing commercial space, contact KPI today.