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Should you rent or buy space for your new business?

On Behalf of | May 4, 2022 | Real Estate

During the earliest stages of starting a business, you will need to make numerous important decisions. You have to decide what structure you will use and the employees to hire. You have to decide on pricing and many other important factors that will govern not just your daily operations but overall success.

One of the more crucial considerations as you develop your business plan will be the location where you do business. Whether you intend to manufacture goods or open a retail business, you will need physical facilities for your business operations.

Is it a better choice to buy or rent commercial space for your company?

There are positives and negatives for each choice

There are some clear benefits derived from purchasing commercial space. You are not subject to restrictions by a landlord or at risk of rent increases. You accrue equity with each monthly payment, making the facilities that you operate an asset that contributes to your company’s overall value.

However, owning a property means that you have full responsibility for its maintenance and also liability. Additionally, it can be difficult to obtain financing for a business model not yet proven with successful operation.

The benefits of renting include less of a long-term commitment and landlord contributions toward maintenance and property repairs. Leasing also makes it easier for you to upgrade to a bigger space as your company becomes more successful.

Negative aspects of renting commercial space involve having little control over shared common areas and the possibility that your landlord could terminate your lease when they sell the property to someone else. You have few options if they increase the rental rate or common area maintenance costs. You could also be liable for unpaid rent even if the business goes under.

Setting up a business requires an outside perspective

The best choice depends on your circumstances, as neither solution is ideal for all business start-ups. You can limit yourself and impact your company’s success by making short-sighted decisions when you first start the business. You will better protect yourself and your investment in the company if you work with seasoned professionals who can help you make the right choices given your circumstances and the kind of business you want to run.