Should You Buy or Lease Your Office?

Every business owner with an office will, at some point, get into the problem of deciding whether to continue to lease their office or buy it. It's a big conundrum, so it's no wonder that many get stuck unable to determine which is better.

Precisely due to that, we wanted to assist you in reaching the conclusion that works best for your specific needs. In this article, we will give you the pros and cons of both and discuss which option is better for a particular need. In the end, you will know which choice is best for you. Let's begin:

The Pros and Cons of Leasing

• Pro: Low initial financial commitment

• Pro: Tax-deductible lease payments

• Pro: Additional working capital for spending on the business instead of the office itself

• Pro: Less time spent on taking care of the maintenance

• Pro: You can more easily leave when your business outgrows the office

• Con: Rent will most likely increase when you renew the lease

• Con: Much depends on the landlord and what they want to do with the office space

• Con: The landlord can have specific wants that may hinder your ability to do business as usual

The Pros and Cons of Buying

• Pro: Fixed cost of the office – once you buy it, it’s done

• Pro:  No Rent Escalations

• Pro: You build equity in the building, which can be tapped in the future for expansion purposes

• Pro: Extra space can be rented out for a boost in revenue

• Pro: You start to build equity, which can be used in loans as collateral

• Pro: Interest payments are tax-deductible

• Pro: You get the option to claim deductibles on the property

• Pro: You can make any changes to the office you want, and you are in total control of the property

• Pro: You can claim profits once you sell during your retirement, for example

• Con: Massive initial financial commitment

• Con: You spend a lot of the money that could otherwise be used to grow your business

• Con: Everything involving maintenance and repairs is your sole responsibility

• Con: If and when you outgrow the office, you won’t be able to move your business unless you sell the office and buy a new one

How Should I Decide?

Now, even with all of these pros and cons, it can still be problematic to decide what’s the best solution in your specific case. However, there are several factors you need to consider that will help you reach the best decision:

• If you can’t find a good place to buy, you will have to opt for leasing it. The opposite is also true, so it depends on your specific situation. 

• Your local economy plays a significant role in the decision. If there are many benefits to buying and if most landlords you come across have wants that don't fit with your business, then you should buy an office. However, if the landlord is very accommodating, and the lease is very beneficial, then you should definitely lease.

• The time you are willing to commit to staying in the location plays a massive role in the decision. Buying is only beneficial when you are certain your business will remain there for a long time, and you won't outgrow the office. Leasing is better when the situation is different.

• Contact a local broker in the area who can put together a buy vs. lease analysis to show you the specific economic pros and cons.

In the end, it’s all about taking a good look at all the factors that play into the decision and what your specific situation demands. By doing that, you will have a much easier time reaching the right decision. For more information, you may reach us at info@cbicommercial.com