Most entrepreneurs occasionally dream of buying or building their own office or property. The main reason that dream is not realized is because more than 98% of all commercial, retail and office space is leased, not sold. I have worked with hundreds of business owners on both their new leases and renewals and believe that many good locations suitable for a business, including enclosed malls, strip plazas and street-front office space, are already owned by a landlord who wants you as a long-term, rent-paying tenant not a buyer.
Would more business owners own their company’s building if they could? Yes. But unless he’s willing to move from his current leased premises to a lesser location, the average business owner won’t be able to find a suitable purchase or construction opportunity.
But if you’re in the enviable position of considering buying a site, here are some pros and cons to consider regarding leasing versus purchasing commercial, retail or office property.
Pros
- Paying off a mortgage is better than paying lease payments forever, and monthly mortgage payments are often also similar to monthly rent payments.
- Your property equity will increase over time. Appreciated value will vary depending on location and city.
- You don’t have landlord hassles; you feel in control and can operate your business the days and hours that suit you.
Cons
- You might have to sacrifice on location strength or desirability. Many of the ownership opportunities are in secondary locations and not on the busier streets. If you’re moving an existing business into a secondary location for purchase, it’s not as bad because you might have loyal customers who will follow you.
- You would have to move out or away from your current space giving up a well-established location that a “similar-use tenant” might lease. Landlords almost always try to replace one industry tenant with another, so the possible competition should be a potential concern to you.
- You might have to become a handyman or deal with various ownership issues like heating, ventilation and air conditioning units and building maintenance that a landlord would previously have taken care of for you.
When it comes to leasing versus purchasing, don’t purchase and move your business into a property for the sake of owning real estate. Buy a property for your business only if you would lease it anyway. If you own the property you do business in, the perfect scenario at retirement time could be to sell the business but keep the real estate, which will provide you with a good long-term source of reliable income. •
