You must have heard a lot about the benefits of buying residential properties for family accommodation. In contrast to that, you may not find positive votes for purchasing commercial property to settle down your setup. After observing the local and international market you will end up finding leasing is clearly dominating buying properties. Primary reason for opting to rent over buying is a shortage of property units available for sale. 95% of the office, manufacturing plants and retail units are available for rent or long-term lease. Commercial landlords hardly sell their assets, rather they prefer long-term leasing. Despite knowing these facts, if you still want to purchase a unit to establish your business setup, do your homework to understand few pros and cons of buying and leasing commercial assets.
Pros of buying commercial property
Being the legal owner, you are eligible to make any changes in the internal and external layout. You are free to make expansions in case you need more space. You are free to manage your space according to your requirements. You are not answerable to anyone else. No one is eligible to ask you to vacate the place unless you decide it yourself.
Right of reselling
Irrespective of the type of unit you possess, being a legitimate owner, you can sell it anytime. After showing tremendous growth, business properties are usually considered as lucrative investment opportunities. If unfortunate conditions destabilise the market you have complete rights to decide its fate. The best part of owning an industrial unit is that it continues to grow even asset market is not performing well.
Better future planning
As you accurately know the exact amount you will be spending every month on mortgage payments, budgeting and financial decisions becomes easy. It supports you to make bold financial decision and expansions in future.
Cons of buying commercial properties
Irrespective of its type, real estate assets are always expensive. Condition remains same when it comes to purchasing a business unit. Be ready to pay a big amount as down payment to fix the deal. In most of the cases, sellers ask you to pay 25 to 50% of the total cost as an initial deposit. Besides this, you have to satisfy them you are able to afford the total expenses.
Restrictions over relocation
You may have selected the most suitable property after observing the current needs; it becomes insufficient if your company grows faster than your expectation. Sometimes relocation becomes inevitable to execute the mounting needs. As you possess the ownership of both business and property, relocation becomes difficult. The situation becomes complex if you are locked into mortgage payments.
Instead of paying purchasing cost, you will also be paying additional charges for renovations, maintenance and structural additions. So add up the amounts to estimating the actual price of purchasing a property.
Pros of leasing commercial units
Freedom to relocate
As you have signed a lease contract for a limited time frame, you are free to move your setup. Whether the current space is not fulfilling your needs, or you are experiencing a downturn; you can relocate to another business unit according to your needs. You can even save some money by shifting to a less expensive district.
Right to spend money
Enterprises have to act promptly to respond sudden changes in circumstances. Sometimes they have to take up fresh opportunities for their survival or in certain conditions they have to downsize their operations. As leasing doesn’t involve taking up a large amount of money, you still possess money to spend to acquire new trading openings.
Cons of leasing commercial units
Less control over expenses
In contrast to purchasing, renting a unit does not allow you to estimate the expenses. As rents are tending to increase every year, you will also have to pay additional amounts as a premium to renew the lease contract.
Lack of authority to manage
As you are occupying the space of someone else, you will be directly affected by the decisions of your landlord. If they decide to sell their property you might have to relocate to another place. Shifting to a new place during the peak season is not less than a nightmare for an entrepreneur. It not only put a financial burden but also impacts your customer base.
Choosing between leasing and buying commercial properties requires extra care, as a decision made on this stage will significantly affect the future of your business.
October 20, 2016