Renting Vs. Buying a Commercial Space

Click here to get this post in PDF

If you own a company, it can be tempting to want to control every aspect of its operation. This could mean having the urge to buy the space in which the business operates. However, it may not be wise or even necessary to buy a building to exercise such control. Here are some items worth thinking about when choosing whether to buy or rent a commercial space to run a company.

Leases Are Negotiable

You may believe that you have to buy an office building to have meaningful control over how the space is used. However, landlords are often willing to negotiate the terms of a commercial lease. This may allow you to choose how common areas are used or gain access to the entire building as opposed to just one or two floors. Custom lease terms can also make it easier to use your brand’s logo and colors on the front of the building or in other strategic locations.

Renting Will Not Decrease Your Liability

If you rent a building, you are just as liable for anything that happens on the premises as if the building was purchased outright. Generally, the best way to protect against any liability issues is to buy an insurance policy. In most states, a corporate tenant who operates in a given space is responsible for providing a safe environment for everyone on the premises.

The only way a landlord would be responsible for damages is if there was a dangerous condition that was not disclosed to the business that leased the space. Therefore, liability concerns shouldn’t dissuade you from buying a building outright if that is what you want to do.

How Long Will the Company Occupy the Space?

Buying a building can be a good idea if a company is looking to stay in one spot for several years. Even if the company goes under, the building and land that it sits on can be used to offset any losses the owners incur. In some cases, the building and land can be used as collateral for a loan that can be used to fill a large order or otherwise expand the business. However, if the business isn’t planning to stay in one spot for more than a couple of years, it may be better to rent as it provides more flexibility.

How Much Space Does the Company Need?

If a business doesn’t need more than 500 square feet to operate effectively, it probably isn’t a good idea to buy an entire office building. Instead, it is likely a better decision to rent space or share it with another company. Depending on the needs of a company, it could be worthwhile to convert an attic or basement into a home office.

Can a Building Be Used for Multiple Purposes?

Buildings can be built to meet both commercial and residential needs. If you are looking for a long-term investment opportunity, buying a building that is zoned for business and residential use can increase the odds of seeing a return on the investment. Depending on your needs, you could also choose to rent such a space and provide a more consistent living situation for yourself and your family.

Buying a Building Could Require More Upfront Capital

Typically, buying a building means having enough money for a down payment as well as insurance and other closing costs. It may be possible to get cheap insurance quotes and affordable mortgage quotes online. Furthermore, you or your business will need good enough credit to get a loan to finance the purchase. If you don’t have enough money to invest in a new building, your only option could be to rent.

There are many variables that go into whether or not you should rent or buy a commercial building. Ideally, any decision that is made will take into account your financial and other needs both now and into the future. Consulting with an accountant can make it easier to make the best decision for your company.

About the Author

Dawn is a loving wife and mother of three and an up-and-coming entrepreneur. She has spent the last couple of years trying to get her business off the ground. In her journey, from working for a big CPG company and a pretty popular tech company to starting her own business, she has learned a lot about the difficulties of running a business and how to be successful. With all she has learned about business, she has decided she wants to help other businesses avoid the mistakes she has made and help them succeed even when she is still searching for that very thing for herself. First and foremost is her family. Second is her business and helping others with theirs.