Being a small business owner has its own roots of motivation.
Some individuals choose to be a business owner because they want to create their ideal environment, to fulfill one’s dream, or to share their talents with others. Having a physical store for an SME is a challenge especially if funds are limited. The question of whether you should buy or rent a commercial property is an important question that all business owners need to review early in the business development process. We know that it is a financial burden for a business but let us first see the pros and cons of each option, and consider what is best in the Long term.
Why rent a commercial property?
- It is more expensive to buy a space in a prime area than renting one.
- If your business is expanding more rapidly than expected, it is better to rent with fewer constraints on your business, and with the opportunity for expansion.
- You won’t be locked into anything long-term if there is a change in your personal or business.
Why buy a commercial property?
- There is stability in owning a property. You do not have to find new premises at the end of the lease, or move assets and fit-out the new space.
- Repayments are at a fixed rate which helps you to budget better.
- A potential capital gain is included when you decide to sell your property in the future. It is an asset whilst business is good, and selling it can bring in income when needed.
Why NOT rent a commercial property?
- There is no equity in renting. Moreover, you are funding someone else’s retirement from the payment you give.
- Instability in variable cost is a disadvantage when you rent because you may be subjected to annual rent increase and higher renting fees when your contract expires.
Why NOT buy a commercial property?
- You are responsible for all the maintenance.
- There are property, appraisal, and maintenance costs, along with a large down payment and possible property improvement costs.
Planning for the long term means looking into purchasing or renting. If you outgrow your space, you can always buy another, or you can always outsource some work to trusted 3rd party vendors.