Leasing Or Buying Commercial Property?
If you’re at the point in your business where you’re having to decide whether to lease your commercial property or buy it, congratulations! It means that you’ve reached a certain pinnacle in your business’s growth stage that is well worth celebrating.
Now, like every other consideration that will have a massive implication on how your business conducts its business, you’re going to have to consider this very carefully indeed, and while we certainly do recommend retaining the advice of counsel in this matter, what follows are a few thoughts to consider when you arrive at this very exciting point in your business.
Let’s start by considering the economics of buying versus leasing.
There are solid advantages to both of these avenues and which one you eventually decide on is going to be driven by a variety of factors. The biggest consideration is the amount of cash reserves that you have on hand because generally speaking, your initial cash outlay to secure an asset is going to be less when you lease than when you buy. But, probably the biggest advantage of purchasing, is that you’ll eventually end up paying less in the long-term than if you’d leased and the most obvious advantage is that you’ll end up owning the asset. For that matter, have you considered building your commercial property?
Asset ownership regardless of the asset (but in this case, property) brings many advantages in and of itself. Your assets value will appreciate over time, you can leverage your investment, and in times of financial difficulty, you can use your asset to secure lines of credit to ease cashflow challenges.
On the other hand, if things do go very wrong in your business through no fault of your own, a leased property contract will usually contain a “get out” clause of some sort. In any event, you should consult with a Commercial lease lawyer.
Consider the timing of this decision.
At the moment where you’re having to consider either buying or leasing commercial property, the stars may or may not have aligned perfectly and you may well have to put off this decision until they do. Now, whatever ‘stars need to align’ for your business, you’ll have to determine because each business operates uniquely and within its unique set of realities.
This means that for your business, possibly the biggest consideration, in any event, is the financial impact study that you must conduct on your finances to check if this is a financial responsibility that your business can honestly and realistically undertake.
You have to have thorough and complete analyses in as much as the total projected cost of leasing versus buying are, and for that, you’ll need to have identified at least two different options under each category to cost-compare sufficiently.
Once that is complete, the final financials have to be measured against your business’s current financial position, versus your realistic future projections. Understand that your cash flow is going to take a hit in either scenario, so you have to have your financial management and forecasting under tight control.
This is an exciting avenue in the development and growth of your business, but it shouldn’t be your biggest source of regret. You can find a very good read from the financial website, Forbes – here.
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