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With equity and corporate debt proving more expensive and difficult to raise, owners may want to consider selling and leasing back their property. By taking this route, you can convert a fixed asset into cash, which can be directed into business growth, and also maintain control of property through a long-term lease, with terms of 15-20 years.
This question comes up fairly frequently in my business. The big push for leasing is the flexibility which it offers a company. Buying is a long term investment.A company would not likely see any financial savings in the first 10 years and who knows what the company’s needs will look like 10 years from now. Other factors to consider…
Owning your own office space PROS
- Gives you tax deductions (because of property taxes and mortgage interest)
- Gives you the freedom to do what you want with the space. You don’t have to worry about a landlord, or breaking anyone’s rules (except the law, of course).
- You’re responsible for all the costs needed to run an office space, including, but not limited to electricity, water, sewage, trash, janitorial, internet service, phone services and more.
- The upfront costs can also be huge because of the down payment, any renovations that must be done, and other maintenance.
- Once you sign the contract, you own the building “lock, stock and barrel” which means if your company experiences a large growth spurt (or an unfortunate downsizing) you may find yourself with not enough or too much space on your hands.
- Flexibility is a big pro in favour of leasing office space. You can often renegotiate for more space if you grow, or simply move to a new building when your lease is up.
- There’s also a smaller up front cost associated with leasing office space. You sign your lease and you pay a set price per month.
- Leasing can save a lot of time and headaches. By leasing your office space, you can focus on running your business and let the landlord worry about the details of the actual building itself.
- Profile. You may be able to afford to lease in a very high profile area, while buying in such an area may be out of your price range.