5 Things To Consider Before You Rent or Buy Commercial Property

Deciding you need a place outside of the home to conduct your business is a big step. Whether you need a physical storefront, an office building, or a production workshop, the additional space can be a huge boon that allows your company some breathing room to properly expand. However, you still have an important decision to make. Here are five things to consider before you choose to rent or buy commercial property.

1. Current Funds

Both renting and buying are big financial decisions, but you need to decide what your budget for a location is, and how much of your finances you’re willing to dedicate to it. Investing in a real estate purchase can be a good move, but many small business owners aren’t ready to place such a large chunk of their capital into purchasing a property. Plus, buying can come with a lot of hidden fees that might not be evident in the sale price. You also need to consider your expected income from your business and how a rental or mortgage payment will impact those numbers. To get an idea of what financing options are available to businesses like yours, look into business loans in your state.

2. Control Needs

When searching for the right commercial property, you also have to decide how much control your business needs over the property. Many rental properties can’t be altered, or they have contracts limiting the number of changes you can make. If you own a property, you can make just about any changes you like after checking local laws, but then you have to consider how those changes can affect the resale value. As an example, a basic office building or even a storefront might require minimal changes, whereas a warehouse might need significant changes for efficiency and safety regulations.

Making these changes can take days, weeks, or even months depending on the extent of your construction needs, which can have big consequences for your business. If you can’t afford to halt daily operations, you might want to prioritize properties that already meet your needs.

3. Liability

Changing the owner of a property changes who is liable in a variety of different instances. It also likely changes the liability coverage you need from your insurance. The type of work you do, the number of employees, and renting out parts of the property to others can all impact liability. There are many elements that can cause your insurance prices to rise, so this is something that needs to be considered in your monthly expenses before you sign any new contracts.

4. Potential Relocation

If you’re comfortable in your location, purchasing a property might make more sense than renting. If you live away from your target audience, or you know you might want to move for personal reasons, renting might be the easiest option for relocation purposes. It is often easier to get out of a lease than sell a property, especially if you’ve made significant alterations to fit a unique business need. If you can’t sell to a business in your industry, you might scare off potential buyers who will need to renovate. You can do some renovations yourself to make the property more appealing to a broader market, but all that time wasted can have consequences for your company.

5. Building Equity

As your business grows, it’s important to grow business credit and company assets. Having solid credit, healthy finances, and a portfolio of assets makes your company more attractive to lenders should you decide to take a loan out in the future. Owning real estate can be a great way to build equity, but consider how long it will take to pay for the property and how far into debt it puts you.

Both renting and buying commercial property have immense benefits for small business owners. By taking the time to evaluate your business plan and where you are in your journey, you can choose a property that will take your company to the next level.

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