If you run a business, one of the things you might consider is whether to rent or buy a commercial space. This depends largely on your financial situation and willingness to take on the responsibilities of ownership versus simply renting. Renting a commercial space can provide a lot of benefits. This guide will look into the advantages of renting over buying a commercial space.
1. Smaller Financial Commitment
One of the biggest reasons why business owners prefer to rent is because it is a smaller financial commitment. The cash outlay is a lot less than an outright purchase. Let’s look at an example.
If you buy a 1,200 square foot commercial property on the outskirts of Philly, you’ll need to pay anywhere between $250,000 and $300,000. In a downtown area, it may cost you $500,000. This is just the cost for the building. You will also likely need to pay to improve the store, add equipment, and more. Renting the same area may cost you about $2,500 per month on the outskirts and $8,000 downtown, which is substantially less cash.
2. Fewer Maintenance Headaches
You typically don’t have to worry about common area maintenance as a tenant. You simply pay your rent and run your business. If you own the building, you need to worry about everything from exterior maintenance to roof repairs to cleaning to sidewalk maintenance to snow removal to property insurance to lawn care and more.
3. Lower Financial Risk
When you first open a business or a store, you’re already taking a chance to get your business off the ground. You’ve probably put your savings into the business, which is a risk on its own. If you buy a property, you’re adding substantially more risk by starting another business (real estate), especially if youâ€™ve never bought commercial real estate before.
4. Greater Flexibility
Renting a store provides you with a great deal of flexibility, which you won’t have if you own it. Consider these â€“
- Is the location right for your business? If not, you can easily choose to leave at the end of your lease.
- Is the space too small or too big for your business? If not, you can easily choose to move to a space that is bigger or smaller without any trouble at the end of your lease.
With a rented store, you can learn from some of your initial mistakes and drive your business towards greater success.
5. More Predictability
When you rent, it gives you a more accurate picture of your outgoing expenses every month. As a store owner, you have no control over certain expenses. For example, if a pipe bursts or the roof leaks or the window gets smashed, these are expenses you may have to incur. There are a lot of unknowns when you own the property yourself.
There are several advantages to renting a commercial property over buying. It’s time for you to decide what works best for you.