Should You Buy or Lease a Commercial Property? Get Expert Commercial Real Estate Services
Commercial real estate encompasses manufacturing units, storefronts, offices, factories, pubs & restaurants, and more. Whether you are setting up a new business or expanding the existing one, you should get professional commercial real estate services to determine whether to buy or lease.
When you buy a commercial property, you either get it financed or pay in cash up front. But the advantage is you get ownership of the property. With a lease, you can use the property for a specific period against the payment of monthly lease amounts.
At the end of the lease period, the property goes to the owner again. However, you may renegotiate with the lessor to continue using the commercial property or buy it when the lease period ends. While the cost of leasing is typically less than commercial purchases, the limitation is you do not get ownership of the property.
Let’s understand the pros and cons of buying vs. leasing commercial properties.
Should You Buy a Commercial Property? Understanding the Pros & Cons
Discussed here are the advantages of buying commercial real estate properties. If you are not sure whether it is worth investing in such properties, then get expert commercial real estate services and consultation to make an informed decision.
- Right to ownership: With commercial real estate purchase, you get the ownership of the title.
- Value appreciation: A property owner can leverage the advantages of capital appreciation that accumulates over time. The value of a property appraises and you are likely to sell it at a higher price than what you had bought it at.
- Equity Build-up and Debt Reduction: Through amortization of the loan amount, commercial property owners can enjoy equity growth, while ensuring debt reduction. Since both the principal amount and interest is included in the mortgage payment, you gain 100% equity and ownership of the property when you pay down the entire loan amount. Commercial real estate services can help you understand better.
- Better control: Beyond specific legal limits, the property owner has the authority to control the use of the building as they consider fit.
- Regular income flow: If you are not using the property for your business operations, you can lease it out to generate steady income. The income through leasing also appreciates over time.
Coming to the limitations, buying commercial properties involves substantially higher financial liabilities. Often, a commercial property loan involves around 20-30 years of amortization. Hence, commercial purchases are a long-term financial commitment. For small businesses and startups, it may also be difficult to secure lucrative financing options.
Getting expert commercial real estate services can help navigate the legal regulations associated with buying a property, as well as extend support for site selection, leasing, tenant services, facilities management, etc.
Pros and Cons of Leasing a Commercial Property
Leasing of real estate properties typically run from 5-10 years or even more. It is most suitable for startups and small businesses that operate with a small working capital. Let’s understand the benefits and limitations of leasing a commercial property.
- More Flexibility: With leasing, you have greater flexibility in terms of locations. You can lease a property for 5-10 years in a specific location and at the end of the lease period, switch to another lucrative location. Additionally, you have the option to expand, contract or relocate in the future. Get in touch with commercial real estate services to know more.
- Lower Costs: When you lease a property, the cost can be substantially lower than the amount of you pay as down payment or EMI on a loan. The lease period is typically less than your property loan and so is the total cost of leasing. Hence, the monthly payments are lesser than what you would pay as EMI. Additionally, the initial deposit amount is also lower than the down payment on a loan.
- Stability of Costs: Typically, the lessee has to bear the initial deposit amount and monthly lease payments. They generally do not need to bear unforeseen costs like repairs & maintenance, insurance, taxes, etc.
Getting professional commercial real estate services can help you understand the benefits of leasing over buying one. On the other hand, there are certain disadvantages of leasing that you should keep in mind. This includes loss of property appreciation, lack of control, loss of salvage value, and contractual penalties on improvements. After thoroughly adjudging the pros and cons of both buying and leasing commercial properties, make the right choice.
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