When you’re searching for a property for your business, one of the biggest decisions you’ll have to make is whether to buy or lease.
For business owners looking to purchase, it becomes a matter of knowing how and when to buy a commercial property in order to make the most out of their investment.
Main difference between buying and leasing a commercial property
Before you take the next step, understanding the main difference between purchasing and leasing a commercial property will guide you towards making the right decision.
Buying commercial property means purchasing it directly from the seller, either through cash or loan proceeds. You eventually gain full ownership of the property once you’ve paid off the entire loan.
Leasing a commercial property on the other hand, is renting it from the owner, either on a short-term or long-term basis. In some situations, getting a lease-to-own plan is an available option for the lessee, which will make them the owner of the commercial property eventually.
If you’re looking for West Chester, PA commercial real estate options, here’s a closer look at some of the advantages you can get when you own a commercial property instead of leasing one.
The value of your property grows over time as demand for commercial property inventory increases. As the property owner, you get the financial benefits of realizing significant profits from a sale after you’ve owned the property for a number of years.
Customization to suit your business needs
Owning a commercial property gives you freedom to design and configure the space to suit your business needs, instead of being restricted to a property’s existing floor plan and features. You can make adjustments and improvements as you see fit, allowing the property itself to grow alongside your business.
Keep in mind that the property housing your business will be very important to the business itself. Purchasing a commercial property allows you to customize the design of the property in order to maximize visibility.
Owning a commercial property helps you save more money
Ownership brings several financial advantages such as building equity and tax savings. You’ll be able to get yearly depreciation deductions on property taxes, and mortgage loan interests are considered tax deductible.
Owning the property allows you to build equity, either by paying down the mortgage, or appreciation of your property’s value. In most cases, mortgage payments are less compared to the rent you’ll need to pay in order to lease a comparable commercial property. Not only will this help you save more money in the long run, but you get better flexibility over your monthly budget as well. In effect, your money is working for you and your business when you’re paying a mortgage, not for your landlord.
Consistency and stability
With a long-term fixed-rate mortgage, you get better control over your monthly expenditures, as you won’t need to deal with annual rent increases. Owning the property also means you won’t need to worry about spending more money in case you have to relocate when your lease expires or when your business outgrows the space.
A business that purchases a commercial property typically occupies at least 51% of the entire property, as lenders classify real estate as an investment property whenever the ownership share is at least 50% or less.
If you have extra space, you have the option of renting it out to other tenants, which gives you an additional source of income. For example, if you buy a small building, you’ll be able to rent out its ground floor to a restaurant, a shop, or some other type of business.
Value for your business
One of the biggest benefits of being the owner of a commercial property is the additional income and value it can generate for your business.
The value and equity of your commercial property can increase independently of other sources of income produced by your business. There are some situations wherein the commercial real estate assets can be worth more than the business itself. You can take advantage of this equity by using it as working capital. It’s also easier to accumulate funds, obtain loans with better terms, and sell a business with real estate assets.