Has your business outgrown its current location? Are you contemplating moving into a bigger commercial property to further facilitate your company’s current and future growth? If so, you may be surprised to learn that buying a commercial property affords benefits that leasing one does not. In the paragraphs that follow, we’re going to take a look at some of the advantages to help you decide whether buying or leasing commercial real estate is the best option for you.
- Owning Commercial Property Builds Equity
Once you find commercial property for sale and close the deal, that property begins to accrue equity as you pay off the mortgage. This equity can be used in the future to fund business growth, meaning your investment will deliver far more than its on-paper value.
- You Can Secure a Fixed-Rate Mortgage
Rental rates are continually rising as of late, but if you purchase your new commercial property rather than lease it, you won’t have to worry about this issue. If you secure a fixed-rate loan, the interest rate will never increase, ensuring you’re protected against uncertainty. Just be sure to read all the fine-print and understand that your mortgage won’t ever decrease either – something that may sting if interest rates go down before you pay off your loan.
- Owning Commercial Property Gives You Income Opportunities
Say you only need about 60,000 sq. ft. of space for the current size of your business but plan to grow in the future. You can purchase a 100,000 sq. ft. space and rent out the 40,000 sq. ft. you aren’t using until you need it. The rent your tenants pay will help cover your mortgage, and you’ll have the larger space you need when the time comes.
- Owning Commercial Property Comes with Tax Benefits
When you own commercial property, you can depreciate the building over the life of the loan, saving hundreds (if not thousands) of dollars when factoring in taxes and earnings.
There are other tax benefits you’ll be able to take advantage of, including deductions for mortgage interest and property taxes. If your business is of the non-profit variety, the government allows for additional tax breaks that leasing just doesn’t afford.
- Improvements to the Property Will Add Value
Leasing a property limits the improvements you can make. Most landlords do not appreciate when tenants make significant changes to the property, as doing so can make the property less desirable to the next tenants.
However, when you buy a commercial property, you can make all the changes you see fit. Also, any changes you make will add to the property’s overall value, increasing the equity you have in it. Making such improvements when you lease only lines the landlord’s pockets.
Finally, because you’ll be staying in the property long-term, you won’t have to spend extra money outfitting new properties with the amenities you need every time you move from place to place. This can mean big savings, especially if you have the type of business that requires heavy machinery and custom equipment
Whether you lease or buy commercial property will depend on your specific needs. Not every business can support the purchase of a new building, so renting may be a better choice. However, if you are in a position to buy, the benefits listed above might help you cement that decision and start hunting for your ideal property.