14 Sep The pros and cons of buying versus leasing commercial real estate
If you lend to small business owners, they may ask you if it’s better to buy or lease a commercial property. Which is best? This will depend on your client’s circumstances. There are pros and cons for each. Taking a look at both options will help you advise your client to make an informed decision.
What are the future plans? When you get an answer to this question, you’ll have part of your answer of whether it will be best to purchase or lease a commercial property. Will this be a permanent or temporary location for the business? If the client expects to be there seven years or more, he may be better off buying the property outright. However, if it is only a temporary location, it may cost less to lease the property. Leasing over an extended period of 15 years or more, by the way, costs substantially more money — as much as 86.6 percent more than buying.
Of course, there are other factors to take into consideration. If the business owner is uncertain whether she will need a bigger property or she just does not want to deal with the maintenance and upkeep on an owned property, leasing may be the better option.
Essentially, leasing affords flexibility if the business circumstances change while buying is a permanent decision and offers some stability. There is no right or wrong answer – it just depends on each unique situation.
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