Whether you office for rent Whether you’re buying your own office space or leasing it, it represents a major financial investment and there are pros and cons to each. If you’re still undecided on which move is right for you, here are some issues to consider that G Office Suggestions for you.
Benefits of renting an office
If you haven't found the perfect property to buy yet or aren't ready to make the commitment to buy, renting offers a number of benefits. Here are four to consider.
- No down payment. When you buy a property, you’ll need to put down a large down payment, anywhere from 10% to 30%. But when you choose to rent an office, you’ll only need to pay a deposit, which is usually equal to one month’s rent, and if you use a lump sum, a one-time broker’s fee. Renting allows you to use your remaining cash for working capital or expansion.
- You can deduct your lease payments. When you lease commercial property, you will be able to deduct your lease payments, as well as other rental expenses, on your taxes.
- The landlord is responsible for repairs and maintenance. Depending on how you negotiate your lease, your landlord may agree to pay for maintenance, repairs, and improvements, especially if you choose to rent coworking space. You will likely be responsible for keeping the carpets and interior spaces clean, but the landlord will be responsible for keeping the building in good repair. Make sure your lease specifies who is responsible for what.
- You can lease office space in a more upscale area. Buying commercial real estate in an expensive area can be cost-limiting, but choosing to lease office space will give you access to more upscale real estate for less money than if you were to buy there.
On the other hand, when you choose to rent, you will not create equity in it, nor will you have complete control over it. In addition, each time your lease is renewed, your rent will likely increase, especially in high-demand areas.
Benefits of buying real estate for office use
Buying a commercial property can also give your business some distinct advantages.
- You’ll build equity. One of the biggest advantages of buying is the equity you’ll build over time. Eventually, you can use this equity as collateral as you expand your business. You can even use it to fund your retirement.
- Your costs will remain stable. When you take out a fixed loan, your monthly payments will never increase over the life of your loan.
- You can depreciate your building. While you won't be able to write off the entire cost of your property at once, the tax authorities will allow you to depreciate the property.
- You can deduct interest payments on your taxes. Unlike a lease, you won't be able to deduct the entire monthly payment, but you can deduct the cost of your mortgage interest.
- You can rent out additional space. If the property is large enough, you can use it to increase your cash flow by renting out additional office space for additional monthly income.
- Of course, when you buy commercial real estate, you'll have to make a large down payment. Depending on your situation, that cash might be better used for other things, such as directly funding growth.
There is no right answer to whether you should rent or buy an office – you should make the decision based on your personal circumstances. If finances are your only factor, check out this breakdown.
