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Leasing Vs. Buying If you are deciding whether to buy office space or continue to lease, there are several aspects you should consider. Of course, each business is different, but following are several common features for every business. Cash Expenditures: If you are planning to purchase an office, you can expect to make a down payment of between 10% and 25% of the purchase price. Of course, this would depend on the lender and your credit. Obviously, you would not need to put down as much cash in order to lease office space. Normally the tenant would pay first and last months rent, which would be about 10% to 15% of the cash down payment required to purchase the office space. Opportunity Cost:
You would need to consider whether the projected
return on your investment in purchasing office space would be greater
than if you were to rent and invest the money you would have used for a
down payment in your business or other investments. Fixed vs. Variable Cost:
When you buy office space, you can project what your
costs will be over a long period of time. This is particularly the case
if you have a fixed mortgage rate. On the Growth Considerations:
The growth rate of your business is an important
aspect to consider when making a decision to lease or buy. If your
company is relatively new and has the potential for a high growth rate,
leasing would probably be a better option, as it would allow more
flexibility and fewer limitations to the growth of your business.
However, if your Property Management:
The expression "time is money" certainly applies to
property management. You must manage your office space if you own it,
which means you can either hire a property manager or do it yourself.
Businesses with a long term growth outlook may purchase more office
space than they need at the time of purchase, then rent out the excess
space. This is all the more reason for high-quality property management.
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