There’s no question that every business needs a place to call its own. Whether you sell products to walk-in customers, distribute items to other businesses or carry out manufacturing, you need a building that adapts to your operations. One of the most important questions you need to answer is whether it makes sense to keep renting or purchase commercial real estate. Here are several factors that can help you evaluate the benefits of owning commercial real estate.
Costs
Every lease and loan is different, and of course, costs are also dependent on the property you have your eyes on. In general, however, buying commercial property for investment is far cheaper in the long run than leasing. This isn’t really surprising, because the same thing is true for other business loans and leases, such as for equipment and vehicle purchases. Also, just like equipment and vehicle purchases, there is a lease to own commercial property option.
However, leasing usually costs less in the short-term. In other words, with a lease, you’re probably going to pay less every month, but you will end up paying far more over time than if you purchase your own building. This is money that you could put toward brand new equipment, software upgrades, additional employees, and other needs, so it’s nothing to sneeze at. If you want to get the most bang for your buck, commercial real estate financing is the way to go. A question sometimes asked is, can you live on commercial property. Some lenders may not lend to owner-occupied commercial real estate. When considering purchasing property also remember the commercial real estate tax benefits.
Time in Business
It’s essential to think about how long your company has currently been in business before applying for a loan. This is for two reasons. First, long-term loans, including SBA loans, generally carry minimum requirements for time in business. Lenders want to see that your business is well-established and that it has a stable cash flow.
In addition, thinking about time in business is good for you, too. If you’re not sure how much success your endeavor will have, it may be better to lease for a few years first until you get on your feet. That way your monthly overhead is lower and you can put this capital to work for growing your company. Getting high-quality equipment at the beginning is very important.
Goals
Before you buy your first commercial real estate property, think about your business goals. How much do you plan on growing? What type of expansion do you envision? In the case of physical growth, you can adapt ahead of time by making sure the property you buy is large enough to accommodate the increased production. If you’re planning on opening several satellite locations, however, you may be better off leasing instead.
With so many options available, getting financing isn’t that difficult anymore. The right decision depends mainly on your business.
