Buying vs. Leasing: A Common
Your lease is expiring. You have
outgrown your current facility. Your building needs are very
specific, and you are tired of paying rent. What do all of these
scenarios have in common? Right, it's time to start looking for
a new building for your business.
Maybe you will find an existing building
that fits your needs perfectly and offers an affordable, long-term
lease to protect your commitment. Maybe you won't. Maybe it's
time to either buy an existing building and renovate it, or perhaps
you should build your own building and stop paying for something
that doesn't completely fulfill your business needs.
In most cities, finding an existing,
affordable building to lease is becoming increasingly difficult,
and what is vacant is going for a premium price. In response,
many business owners are considering building a new facility
or buying and renovating an existing facility.
If you are debating buying vs. leasing,
here are some points to consider:
1) Flexibility: Will your
business continue to thrive and, someday, maybe need to expand?
And if so, what are your options if you own the building: renovate
or rebuild? Does the building have broad market appeal for resale
2) Investment: Do you
consider real estate a good investment at this time, or would
the investment be of better use put back into the business?
3) Control: Does your lease offer the control
over neighbors, parking and maintenance that you desire?
4) Needs: Is the building
right for your needs? What about the needs of future tenants?
Will it require major reconstruction to sell it later? Does the
lease agreement meet your needs?
5) Alternatives: What
else is available in your price range?
The most common reason small business
owners cite for leasing and not owning is the lack of a down
payment. However, Small Business Administration (SBA) Guaranteed
Loans can provide up to 90 percent financing for qualified borrowers,
and specialized conventional loan products like TMSDirect SM
offer up to 100% financing for qualified applicants, making ownership
a reality for many small business owners.
If you do choose to buy, here are some
of the advantages you'll enjoy:
Appreciation: Every dollar your building
appreciates and every dollar applied toward the mortgage principal
translates into a dollar of equity.
Tax Advantages: Mortgage interest and
depreciation on commercial buildings presently are fully deductible
for both state and federal purposes. Moreover, costs associated
with the loan may be deductible.
No Rent Increases: You'll have no landlord
and are not subject to escalating rents.
Savings: With the inherent savings
of ownership, you'll be able to devote more working capital to
increasing sales and profits. In fact, monthly mortgage payments
are often less than previous rent payments.
Business owners who are weighing the
options of buying vs. leasing should consult with an accountant
to more accurately ascertain the specific advantages for their
unique situation. More often than not, businessowners find that
buying their building is one of the best investments they can
make for their business.
- David W. Moore, Jr.
- Norfolk, VA
- (757) 640-7592
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