Should You Lease Commercial Property? Here are the Pros and Cons
There are a lot of things to consider when leasing commercial or private property for your business. Whether you need more space for your business or you’re downsizing to a more manageable living space, commercial and private property have pluses and minuses.
Below are tips discussing the considerations and advantages of both.
Commercial rental properties require regular maintenance, thus eliminating working hours for some of the workers. It’s less expensive to hire a person through an employer than to assume their costs as an independent contractor.
- Economic and tax advantages
Because of its economic and tax advantages, a commercial property lease is an excellent financing and investment vehicle, with low monthly payments compared to required down payments or mortgages on comparable purchases.
Flexibility is a large advantage of leasing. This is because you only pay for space when you need it, and this means that your company can be free from financial constraints.
Different businesses have different needs, and this makes it difficult for them to buy office spaces, especially if their finances are limited.
It is a more cost-effective way to go when you want to avoid financial liabilities in the start-up process. You can lease commercial or private properties and work with sub-tenants who are willing to pay you a deposit and monthly rental fee for property space or sub-lease it to them for the amount of time you decide.
- Tricky and time-consuming
Leasing is one of the most common ways to secure short-term office space. It’s relatively quick and easy, but it’s still a process. You have to call around and find places that are available, send out letters of intent, negotiate terms with the landlord, sign a lease and depending on the lease type, and you may have to put something down as a security deposit. All this can be time-consuming if you have a tight deadline.
- High cost of maintenance
The maineason commercial and private properties fail is because of failure to maintain the property or business. The average cost of maintenance on a building can be anywhere from 10% to 25% of sales, depending on the size and age of the building, square footage, utilities used, zoning, etc. In a down economy, these costs can really add up and cause issues.
- Decreased liquidity
When you have a residential lease, you can sell your home under two years and do not need to provide an opportunity to get back the security deposit. However, in the case of a commercial lease, it is quite difficult to get rid of the property within two years.
If you are in the market for commercial property, we’ve broken down some of the pros and cons for you. Study the above tips and make an informed decision about what is best for your business in the long run.