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Business owners: Should you buy or lease commercial property?

Aspiring and existing business owners all wrestle with the question of whether they should lease or purchase commercial space.

The advantages in the two options are clear: when you lease, you have a smaller upfront cash outlay than if you buy. The biggest advantage in buying is that in the long run, you will spend less than if you’d leased. Plus, if the property appreciates in value, that benefit is yours.

Of course, those are the most obvious advantages. There are more upsides on both sides of the lease/purchase question.

Leasing advantages

  • Cash flow: with a smaller initial expense, leasing can improve cash flow.
  • Credit rating: for businesses without a credit rating sufficient to obtain or support a mortgage, leasing can be the best (or only) option.
  • Maintenance: when you buy, you’re responsible for maintenance and when you lease, the landlord is responsible.
  • Location: in some situations, an ideal business location isn’t available, so leasing enables you to get the business established while you wait for a better spot to become available.
  • Taxes: rent is a deductible business expense

Purchasing advantages

  • Savings: when you lease, you are the source of the landlord’s profit. You avoid that profit premium by buying.
  • Location: if you find the perfect spot for your business, owning means you can’t be forced to move.
  • Control: if there are renovations a property needs to be suitable for your business, owning means you don’t need a landlord’s permission for an upgrade.
  • Taxes: depreciation might be a source of tax savings. So might interest-based deductions on a financed property.

An attorney experienced in real estate law helps business owners navigate matters involving purchase or lease contracts, closings, refinancing, mortgage histories and verification, title searches and more.

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