Factors to Consider When Deciding to Lease or Buy

If you are considering beginning your search for office space, you may have questions or hesitations when it comes to deciding whether it is in your best interest to rent or buy your property.  With so many potential benefits and downfalls to both options, it’s no wonder that it’s not the easiest decision to make.  That being said, educating yourself on the possible outcomes of both can give you the tools that will help you to come to a well-informed conclusion.  Read through the next paragraphs to gain a better understanding of some common pros and cons.

Pros of Buying

There are many positive aspects of choosing to buy your office space.  Among them are:

• Fixed Costs: A long-term commercial mortgage will offer your business the stability of knowing what’s ahead instead of dealing with the possibility of rent increases.
• Tax Deductions: When you purchase your property, you will be able to write off any building depreciation, mortgage interest and property taxes, as well as many other associated costs of maintaining the space.
• Property Appreciation: You have access to the advantages of positive fluctuations in the commercial real estate market that will encourage your property to increase in value.
• Adaptability: With no landlord to consult, you have free reign to make any changes to your property that you deem beneficial to its overall functioning.
• Income Potential: If your office space offers more room than you need to effectively run your business, you have the ability to rent out the extra space for additional income.

Cons of Buying

Unfortunately, purchasing office space comes with its own set of potential pitfalls as well.

• Up Front Costs: Purchasing commercial real estate typically requires a much larger down payment to acquire the space.  You will also likely need to budget in money for inspections, attorney’s fees, and broker’s fees.
• Repairs & Maintenance: As a property owner, you will be solely responsible for any and all costs associated with maintaining it, as well as repairs or replacements that may become necessary.  Not only can this affect your bank account, it can also be quite time-consuming.
• Increased Liability: As the owner of a property, you hold much more responsibility when it comes to other people.  Depending on the property you choose, parking lot fender benders, sidewalk slip and falls, and/or any injuries that may occur within the actual building, will fall on your shoulders.
• Resale Risks: As the market fluctuates, so will the worth of your office space.  If you find yourself needing to unload your property quickly, the state of the market can greatly affect your resale rate.

Pros of Leasing

If you think it might be in your better interest to lease, here are some of the benefits you might look forward to:

• No Large Down Payment: While leasing office space may require some up-front costs, you won’t be hit with the same large down payment that you would if you chose to purchase.
• Tax Deductions: Much like purchasing office space, there are also big tax breaks for renters.  You will have the ability to write off your rent, insurance, taxes, utilities, and repairs.
• Flexibility: If you are uncertain about how your company may progress, leasing gives you the flexibility to grow by offering shorter lease terms as opposed to long-term mortgages.
• Responsibility: With most leasing situations, your landlord will be largely responsible for any major repairs or damages that need to be done.  They will likely employ a management company to take care of routine maintenance.

Cons of Leasing

However, making the decision to lease office space may also have some detrimental consequences for you to consider.

• No Equity: Leasing office space doesn’t offer the tenant any benefit in the event that the market shifts and the property value increases.
• Periodic Rental Increases: If you choose to lease your office space, you don’t have the benefit of fixed costs.  In fact, your lease will likely outline gradual rental increases over the course of the lease term.
• Landlord Limitations: Having a landlord means having to ask permission to make changes to the property that could positively impact how your company runs and thrives.

Looking for Office Space in the Hattiesburg Area?

As you can see, weighing out the risks and rewards associated with buying and leasing office space is a necessary step to help you make the decision that is best for you.  Working with a professional that can help you to further navigate the needs of your business will only further your confidence in your final ruling.  At SVN | Southgate, our dedicated team of commercial real estate professionals is eager to make the process of finding office space convenient, easy, and understandable to our clients.  Check out our database of quality office space available on the Hattiesburg market and contact us today to begin your search.