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When it comes to being a new business owner, many big decisions need to be made and questions that need to be asked. Questions like should new business owners buy or rent property are often on the list of things that business owners ask themselves.
Once you, as a new business owner, decide what your needs are for the right facility is when you can figure out whether or not you need to rent or buy property for your business.
To help you figure out which decision is right for you and your business, it is important to ask yourself a couple of questions to understand your needs. You also need to go over and understand the pros and cons of both renting or buying.
When it comes to deciding on whether or not you should buy or rent property for your business, there are a couple of questions that you should ask yourself.
What is your cash flow situation?
Your cash flow situation is a huge part of the decision that you are making. In the beginning stages of business, cash flow is often an issue.
You are spending money left and right on the best white wine gift sets and other marketing techniques to attract new customers.
Often because of this, a new business doesn’t have enough money on hand for the expenses of purchasing. Here are just some of the costs that you should expect when purchasing property for your business.
- Purchasing property often requires a significant outlay of money. Either a considerable lump sum of cash for outright purchase or a substantial down payment on the mortgage.
- Maintenance expenses. Just like with homeownership, a business property owner is responsible for the maintenance of the building. What if the properties pipes freeze? Are you willing to contact a place to install a system to prevent the problem from happening again? When discussing business property maintenance, it’s important to remember that maintenance is vital. A business property needs to be kept in good condition and good appearance. This is vital for customer satisfaction as well as for liability reasons. For this reason, a business needs to keep a large amount of cash on hand to cover these expenses.
Do you have enough time to focus on property ownership?
Not only is it imperative that you have enough cash flow on hand to purchase property for your business, but you also need to recognize whether you have enough time to focus on property ownership.
As mentioned, property ownership requires you to be responsible for the building’s maintenance and upkeep.
Do you have the time to be responsible for this and continue to grow your business?
Do you plan on staying in this location forever?
With the investment required to purchase property, you will want to make sure that you are planning to stay where you are for a considerable amount of time.
If you have asked yourself these questions and you are still on the fence whether renting or buying is right for you, check out this list of pros and cons to see if they help you make your decision.
Should New Business Owners Buy or Rent Property? Pros of Buying
Here are some of the advantages of a new business buying their own property.
You have control of your space.
This is ideal if you want to make major changes, additions, or renovations to your space. This is often not possible to do when you are a renter.
The long term cost is often cheaper.
While you often have significant cash outlay when you purchase property, the long term cost of ownership is usually less than that of a rental. Your property value will grow, plus you won’t have to worry about rising rent over the years.
Location Location Location
You may want to be in a specific location, so purchasing the perfect property with the help of a professional is your best bet.
There is no guarantee that your ideal location will have rental property available. Alternatively, if you find a perfect place, you won’t have to worry about rental issues causing you to move.
Property ownership often brings with it tax savings. You may find that while you can’t deduct your monthly mortgage as you can your rent, there are tax savings that will add up over the years.
Should New Business Owners Buy or Rent Property? Pros of Renting
Less Cash Outlay
When you rent a property for your new business, you will have less cash outlay than that of purchasing.
Typically you might have a security deposit, plus first rent payment, and that’s it. That is often much, much less than the down payment needed for buying property.
No Maintenance Responsibility
As a renter, you are not responsible for the maintenance of the property. That means that you don’t have to put out the time or money for property upkeep.
You Can Change Locations
If you feel that you might want to change locations at some point in time, then renting is the right choice for you.
Starting your business is a big deal, and once you have determined your needs as it relates to your business location and facility, you need to decide on whether or not to rent or to buy. Whichever decision you make, this is a huge step in the growth of your business. Congratulations!
Are you a business owner? Do you rent your business facility, or did you buy it?
Krystle Cook – the creator of Home Jobs by MOM – put her psychology degree on a shelf and dived into a pile of diapers and dishes instead. She is a wife and mother to two rambunctious boys, sweating it out in her Texas hometown. She loves cooking, DIY home projects, and family fun activities.