Consider five essential questions as you figure out if you’re ready for the next big step for your business.
Many small-business owners struggle with the dilemma of deciding whether to buy, rent or lease Tucson commercial real estate for their office spaces.
In trying to make this decision, remember this key point: Each small business brings its own situations and concerns to the table. That means the answer will be different for each business owner.
A good place to begin figuring out which is better, buying or leasing, is by examining
- your company’s current business plan and earnings forecast
- the credit history
- the Tucson real estate market.
Every business idea needs to be carefully researched before making any final decisions.
Several Factors Affect Decisions to Own
As you are searching for the right answer, there are several questions to keep in mind.
How is your cash flow? Examine your cash flow projections carefully. As a new small business owner, you may be short on cash, so it will be less expensive to rent or lease a facility when you are just starting out.
For example, imagine you could lease a building for about $4,000 a month. If you want to purchase that same property, you would need a substantial down payment in addition to the monthly payments on a mortgage, one of the highest fixed business expenses.
How long will you stay in the building? If you think you will be in one particular building for fewer than a few years, it might be worthwhile to rent rather than buy.
However, if real estate values in your community keep rising, then you should consider the purchase option instead. Property can be a great long-term investment.
Do you like the general area? Many small businesses make the mistake of buying a building only to realize later that they do not like the location. Be sure to think about issues such as insufficient parking or a continuous decline in real estate property values.
Are you ready to take on additional responsibilities? When you purchase a property, you are now responsible for maintenance, security, remodeling and other management issues.
Compare the costs and benefits of purchasing against the added expense of handling those new responsibilities. Sometimes it may be more beneficial to let a landlord handle all of those details.
How much will your business grow? If your business continues to grow, you may have to hire more employees. If you bought the space, you could start using conference rooms as work areas or allow some employees to telecommute.
If you account for growth, then you can purchase a property that is initially too big. Sublet a portion of it, which can help you pay the mortgage or give you additional funds for your own cash flow. Then grow into the space as you need to.
If you lease, you can more easily move to a larger location.