Business is growing or changing, and it’s time to move? There’s nothing quite like owning your own building to house your organization and to meet the special requirements of your processes, equipment, etc. But is owning really the best way to go?
Before you start scouting for an existing building or contemplating new construction, consider these five reasons to lease. If any of these clicks, make a call to your real estate professional.
1. Working capital. Leasing provides virtually 100 percent financing, freeing working capital to help you build your business. A mortgage would generally provide only 70 to 75 percent financing. And, if you can get a better return investing in your business than in real estate, why own?.
By the way, 100 percent of lease costs are deductible, but any land you own is not depreciable and therefore not deductible.
2. Flexibility. When you lease, you commit to the amount of space you need for a certain period of time. Within that contract, you often can renew. Good landlords will help you expand, shrink, or move you to other locations they have available as your business requires. Compare this to owning a building, where possibly unsuited real estate can become a new and cumbersome dimension adding risk to your business decision-making process.
3. Location. For every building that’s up for sale, many more are available for lease. That means more choices in location, in building sizes, and in features. When you’re trying to make the most of your business, having more choices is very desirable.
4. Speed. Or expedience, especially if you’re thinking of developing. Leasing a vacant building lets you leverage relationships with local government officials as well as with the landlord holding the vacancy. Neither wants a vacant building and the undesirable issues they create. Think about it—existing buildings already have Certificates of Occupancy, subdivision, and land development approvals, zoning approvals, water, sewer, electric, gas, etc. It’s all installed and ready to go. Turnkey, with one point of contact and minimal distractions.
5. Responsibility. When you lease from the right landlord the building is theirs and they want to maintain their asset. Maintenance, repairs, snow removal, beautification, modifications, and more are often done for you. And beyond the lease itself, you have no financial responsibilities.
Business by nature is dynamic. Real estate is static, a fixed asset. Leasing is a smart, affordable, and very attractive way to maximize wealth from your business.
If you decide to lease commercial real estate, keep your brand image in mind and lease from a landlord who shares your professional standards, offers a quality aesthetically appropriate environment, and who is able and willing to respond rapidly to your unique needs and problems.
In the next blog, I will offer Five Reasons to Purchase Commercial Real Estate.
Linford L. Good is responsible for managing the brokerage activities of the sales/leasing team. The brokerage activities include selling or leasing industrial/commercial properties for corporations, private industries, and individual investors.
This article is intended to be an overview of commercial and residential financing. It does not purport to give either legal or financial advice. Before taking any action, you should consult with your attorney or real estate adviser.
Linford L. Good, CCIM, SIOR
Senior Vice President of Brokerage Services
High Associates Ltd.