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Difference between Leasing and Owning Commercial Real Estate

There are many factors to consider when determining whether to lease or own commercial real estate for your business. Each option comes with its own set of advantages and considerations, with renting offering flexibility and owning providing stability. The most important factor is typically the financials – does it make more sense to lease or own based on your company’s budget and long-term goals? If you plan to stay in business for the foreseeable future, owning commercial real estate may be the better option. However, leasing may be the better option if you’re not ready to commit to a long-term lease or don’t have the capital to purchase property outright. It’s important to consult with a qualified commercial real estate professional to determine which option is best for your specific situation.

Here are some key differences between leasing and owning commercial real estate that you should keep in mind:

Flexibility with Leasing:

  • Generally speaking, leasing is going to be the more affordable option in the short-term.
  • You will have less control over the property since you don’t own it, but this can also be seen as an advantage because you won’t be responsible for maintenance, repairs, or improvements.
  • Leases typically last for 3-5 years, so you will have some flexibility in terms of how long you stay in a particular space.
  • You may have the opportunity to sublet if your business needs change and you no longer need all of the space that you’re leased.

Stability with Owning:

  • While owning commercial real estate is usually more expensive upfront, it can provide significant tax advantages and may end up being more cost-effective in the long run.
  • Owning gives you much more control over the property, which can be beneficial if you plan on making improvements or customizations.
  • Maintenance and repairs are also typically the responsibility of the owner, although some landlords may include these expenses in their lease agreement.
  • When you own commercial real estate, you don’t have to worry about the possibility of your lease being renewed or increased unexpectedly. This can provide peace of mind and stability for your business planning purposes.

Renting and owning commercial real estate offer distinct advantages in terms of flexibility and stability. Ultimately, the decision between renting and owning commercial real estate depends on your business’s unique needs and long-term goals. While renting offers flexibility, ownership provides stability and potential wealth-building opportunities. Striking the right balance between flexibility and stability requires careful consideration of factors such as growth projections, financial resources, market dynamics, and the specific requirements of your business.

In the following weeks, we’ll be discussing the advantages and challenges of investing in commercial properties, including tips when buying one, stay connected with our blog!  If you find this article insightful, be sure to read some related topics below:

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