A true marker of adulthood is to be able to afford a property and become a homeowner. This applies to businesses as well, with business owners wanting to have a space of their own.
However, buying residential property is very different from buying commercial property—one is a space where you’ll live, the other is a space where you’ll make your living. There are different pros and cons to each, but we will evaluate them from the perspective of small businesses.
Renting vs. Buying—What’s the right choice for you?
Before you settle on a CRE agreement, get in touch with our agency to learn more about your options with commercial properties in Macomb.
1) Know your long term plans
As a general rule of thumb, unless you plan to stay in a space for longer than 7 years, there’s no point in buying it. If you know your business has a certain projected growth or your plans involve relocation or expansion, you don’t want to be bogged down with a major cost like this. Mortgage or loan repayments, taxation, renovation, maintenance, etc. all add up to a hefty bit.
If you’re just starting out, it’s best to stick to property rentals. The bigger your business gets, the more space you’ll require. Look into a more permanent option then.
2) Commitment to maintenance
Rental properties are relatively easier to maintain. As a business owner, you don’t want to be tied up in the day-to-day issues of maintaining your property; this is something your landlord will handle.
However, with owned property, maintenance will become your responsibility solely. This is an added cost to everything else.
3) The investment factor property ownership
Buying means investing in an asset, but it also means that capital gets tied up in the property. Small businesses, especially those in their initial stages, can’t take that hit—even if it’s a business like a restaurant, that depends on space. Evaluate whether you’ll recover that through sales, or if you have capital like that, to begin with.
An advantage is that, over time, the property’s value will appreciate and you’ll have greater chances of making a profit from the increased property value.
4) Stability vs. flexibility
A mortgage offers stability and consistency, since you’re going to have this property to fall back on. However, the flexibility of a lease is what appeals to a lot of business owners. Rentals are easily available and if the space isn’t suitable or you outgrow it, you can choose not to renew.