Lease or Purchase? Which is Better?
Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. Today, we’re discussing commercial real estate and the predicament of whether it’s preferable to lease or to own your commercial property. This is a significant strategic decision for every business firm and each choice comes with distinct financial, operational and flexibility tradeoffs. Hence it’s all about making the right choice which fits best for your business model. So let’s dive into it.
Starting with owning a commercial building, it offers certain advantages like you have complete control over the property, you can renovate or modify the place to meet your specific business requirements. Your mortgage payments contribute to building equity thus adding up a valuable asset to your business. Moreover, commercial real estate properties usually appreciate over time and can prove to be a potential source of future capital. And, most importantly you won’t have to deal with any rent hike over time or any kind of force to relocate when the owner plans for selling or redevelopment of the premises.
Up next, the benefits of leasing a commercial property would be you can save a hefty amount of initial investments that you would have incurred in purchasing the property. This allows you to focus more on the core business activities. You get a much greater flexibility if you lease office space as the lease would contain fixed terms and would allow you to move to larger or smaller space as per your business requirements. Most importantly, you can bag an address at prime locations which would otherwise burn a hole in your pocket if you directly purchase that property. The maintenance and upkeep of the building are dependent on the landlord, freeing your business from any ancillary tasks. For a quickly growing or downsizing business, leasing allows for more agile scaling of the physical footprint.
In conclusion, to make an informed decision, consider your business trajectory, the needs of your business, importance of physical assets, and whether you have the resources to manage your own facilities or not. After analysing all these factors, choose what’s best for you. Here’s wishing you an awesome rest of the day. Go make some great things happen. We’ll talk to you again tomorrow.
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