Saturday, 27 August 2016

Own or Lease the office space?

Own or Lease the office space?
Many small business owners can only manage to lease office space when they are just beginning and that rent often dominates a large portion of their monthly budget. Nonetheless, money is not the only reason to choose to rent over owning.

Why is leasing advantageous?
·       No down payment needed – Generally, you need a down payment to purchase a property, which drains a big portion out of your cash reserves. Leasing let you invest this capital in expanding your business and keep the option of purchasing open for later when your economy is stable.
·       Repairs are handled by property management - When you lease space if the AC breaks, you will just have to call the property manager and wait for someone to repair it. On the other hand, if you own that space, you will have to spend thousands of dollars on repairs each time something big fails.
·       You have short-term choices – While your business grows, it may extend out of its space. By signing a lease of 1-5 years, you will have the option to move to a new spot as per your needs. Leasing also provides you the opportunity to try an area or town to determine whether it is a convenient place for your staffs and clients.
Some ownership risks are:
·       Ownership of real estate needs real estate expertise, resources, and time.
·       It is less flexible than leasing in contraction and growth.
·       The possible loss in asset value.
·       Interest and economic rate risk.
·       The risk associated with transportation issues, neighbourhood quality and demographics.

You should consult with a real estate adviser or a tax professional, to see what fits you best; owning or renting.

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