The Benefits of Renting vs Buying for Retail BusinessesAdmin@ | November 18, 2019 | 0 | Real Estate
Buying vs. renting a commercial property is a major debate among business people. If you are planning to start a retail business, you will need to consider the pros and cons of each option, after which you will be able to make an informed decision. In this article, we will look at the benefits of renting over buying property for retail businesses.
- It Ties Up Less of Your Capital
When running a retail business, you will need liquid funds for things like marketing, employee compensation, and streamlining your operations. If you choose to lease your business premises, you will have to pay about a sixth of the upfront costs you would pay when purchasing the property. With the purchase, you will typically cover 10% to 20% as down payment. More costs that would arise include the closing costs and the due diligence fees. The upfront costs covered when leasing for retail businesses include security deposits, pre-lease inspections, attorney’s fees, and broker’s fees.
- It Offers Increased Flexibility
As a business owner, you will also find flexibility important. In the future, you may need to expand your business, meaning you will want more space. With a lease of 3 to 10 years, you will be able to easily purchase extra space. If you plan properly, you can even transfer your offices entirely.
It is also worth noting that there are always more properties for rent than for sale. You can simply visit online property search services and check the hundreds of properties available. This means you will have a greater selection of business premises when leasing. You will also be able to locate your business in almost any place in the country.
Also, if you choose to purchase a property, your options will be limited by the costs. There may only be a handful of business premises which you are able to purchase. But for rent, you may be able to choose from many more spaces.
- It Offers You Fixed Payments
Rents tend to be fixed, and that makes it easy to plan for the future. With leases, you will not be surprised by fluctuating rents. On the other hand, when you purchase commercial property, your mortgage payments will be determined by the changing interest rates.
- It Comes with Reduced Responsibility
As a business owner, you want to lower your costs to the minimum. Also, convenience is a major factor to consider since some responsibilities can distract you from your main goals. If you choose to lease business property, you will not be responsible for repairs or maintenance of the buildings. The owner of the building will have to cover these costs.
- It Does not Come with any Prepayment Penalties
When you buy commercial properties, you will have to pay the mortgages as per the schedules. If you pay the loan in a lump sum, you will have to suffer high prepayment penalties. This problem does not exist when you rent the premises.
Buying property may come with its own advantages, but overall, it will be the poorer choice for most retail businesses. You should note that leasing and buying business property both come with tax breaks. Since you want to maintain a high cash flow in your business, you should consider renting as opposed to buying the property.