December 7, 2016

The Differences Between Buying vs. Leasing Commercial Real Estate

Considering the pros and cons of both buying and leasing commercial real estate is crucial. It can be tricky to choose for entrepreneurs who are making decisions for their place of business. Since there are advantages and disadvantages to both options, you need thorough analysis and planning before making the decision. Commercial space for rent Westchester NY services has a professional team to help you make the best decision for your business.

Questions to Consider

Generally speaking, staying in the same business location for 7 or more years means that buying will be far less expensive than leasing. But, when the occupancy drops from 15 years to 7 years, then the costs are about equal. It’s important to know that buying will cost you quite a bit more upfront than leasing. You have to ask yourself if you can afford the down payment for a mortgage. And, even if you can afford it, consider if that money could be better spent investing it in growing your business. Do you think it’s possible you may outgrow your space and will have to eventually move? Will you want to handle the additional hassle of maintaining a property?

Opportunity costs

The down payment for a commercial mortgage typically ranges from 10% to 30%. There’s opportunity in utilizing this money in the building itself instead of investing it in your business. When buying commercial real estate, the initial costs will include closing costs and due diligence fees. These are all the legal-related costs, including attorney fees, inspection fees, permit fees, and attorney fees. The closing costs include processing fees, bank fees, appraisal fees, etc. Their amounts can vary depending on location, bank, and property value.

When you should buy

Buying commercial real estate is ideal when your business is generating plentiful cash flow and stability. If you have real estate experience or you’re willing to hire a professional to manage your property, then buying is for you. You can’t learn real estate overnight; it’s something you need to be savvy in, first. You should also consider buying if you’re in an industry with specific technology or security needs.

When you should lease

It makes more sense to lease if you’re running a start-up business. Start-ups are often unable to commit a lot of capital to a building. So, the likely outcome is to go for a leasing option. If you lease instead of buy, you can move to new premises with ease because you’re not locked into a long mortgage.

Whether you’re deciding to lease or buy, considering the advantages and disadvantages of each option will help you make the most informed decision. With the help of the Rakow Group, you’ll find commercial space for rent in Westchester NY, and commercial space to buy. Whatever your needs, our professional and experienced team will meet and exceed them. Call one of our agents today at (914) 422-0100.