3 Ways Leasing Commercial Real Estate Can Impact Your Business
by Subham Kamila Investing Published on: 23 November 2017 Last Updated on: 26 July 2024
When you start a business, you may either opt to buy a commercial property or lease it. When one decides on the former, the business owner becomes takes on sole ownership of the property itself and thereby becomes responsible for them. There are various benefits that are inherent to the leasing of the commercial space.
1. Avoid The Stress Of A Landlord’s Labour
Taking on full ownership necessitates that you care for a property. This means that each and every problem with a building – be it a structural shortcoming or a broken furnace – is something for which you become liable. Moreover, if you’ve purchased a property with several businesses operating within its confines, your landlord duties, of course, extend to those portions of the building. In this sense, you are doubling your workload and adding labor to your weekly schedule that is contingent and potentially very time-consuming – in some cases, you’ll be required to spend money on contractors when repairs need to be made that are either too complicated or dangerous; taking on one of the leasing opportunities for commercial real estate ensures, on the contrary, that there is always someone else available to do these tasks on your behalf.
2. The Cost Of Leasing Might Put Less Financial Stress On Your Business
One of the benefits of leasing is the low-cost security deposit you are required to commit before making use of the premises, whereas buying necessitates a much higher down payment as well as various contingency fees. Typically, prospective owners will be required to pay at least a seventh of the full price. These other costs include the attorney’s fee, pre-lease inspection, security deposit, and the brokerage fee if there is any broker in the transaction. While paying these initials will enable your business to have a better liquidity (as more capital will not be spent on a long-term asset), putting that kind of money out is, nevertheless, a large risk for many business owners, as capital will always be a limited resource – thus, leasing a commercial property could be a more advisable route to take.
Depending on the type of lease, there could be various features that save money during tax season, as the lease for the property is taxable. More specifically, the property tax will not be paid by the leasing individual, rather, it is paid by the owner of the premise.
3. Leasing Means Flexibility
Another great advantage enjoyed by leasing of the commercial premise is the flexibility of the business. It is the dream of any business visionary to expand one’s business in future. One should have the foresight to manage a business premise that can allow for expansion. Given the large volume of commercial properties available for lease on the current market, business owners can rest assured that they can take on a lease that works for their timeline and later dispose of it for a new, more appropriate lease in a new space, one that accommodate an ever-increasing number of employees. The inverse of this flexibility is the rigidity offered by buying – once you have a property to maintain, it is more difficult to rid oneself of those responsibilities.
In short, leasing a commercial property offers business owners a low level of liability and eliminates the fear of property devaluation, all the while evading the need for any kind of lump-sum loans to cover the cost of a down payment. The option, in these ways, might be more suitable for startups and other new businesses, but even establishment entrepreneurs can no doubt benefit from such a stress-free endeavor.
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