Unless your business is completely online-based or you operate out of your home, there will come a time to choose an office space. But when it comes to commercial property, should you rent an office or purchase the space? There are some things to consider before making this big decision.
The growth factor
Buying an office space might not be the best decision if your business can potentially grow and expand very quickly. If you rent and this happens, you can always upgrade when your lease is up. But if this happens after purchasing your property, you will have to turn around and sell it or rent it out, which may not be the easiest thing to do. However, if you anticipate that the office space you need now will meet your long-term goals as well, purchasing the space could be a good idea.
Consider how much money you will have upfront
Usually, just like with residential property, you won’t need as much money upfront to secure a property for rent as opposed for purchase. When you rent property, you often need a security deposit, first month’s rent, and sometimes last month’s rent. When you purchase property, you will need a substantial down payment, in addition to the money to cover costs for building inspections, appraisal, loan expenses and other miscellaneous fees. However, if you are set on purchasing commercial property and you need the cash to do so, contact Peachtree Financial Solutions. If you are receiving life contingent annuity payments, you can sell them and receive your money now. Receiving that cash now in the form of a lump sum can make it easier to purchase commercial property.
The fixed/variable cost factor
When you purchase commercial property, you will have a general idea of any expenses you will incur year after year, particularly if the loan you obtain has a fixed interest rate. But if you rent your office space, you’re subjected to variations when the lease is up. Some leases include a clause that permit an annual rent increase, and if you’re not prepared for this increase in rent, you may need to move your office into a more affordable space.
The appreciation factor
Purchasing commercial property puts you in another business aside from your main venture: real estate investing. Depending on your location and the current real estate market, you may eventually be able to sell at a profit. But if you own property with more space than your company needs, you may end up renting it to other business owners and becoming a landlord. This could go one of two ways: it could either be a financial drain or it could be profitable to you.
The tax considerations
There are also tax considerations to keep in mind when making the decision to rent or buy your office space. Companies often deduct the full amount they pay in rent as a business expense. Property owners can immediately write off any repairs as a tax deduction, but any improvements have to be deducted over 39 years, and depreciation is also taken over 39 years. You may also be able to deduct interest fees, property taxes, and other eligible costs. It’s best to consult with a tax professional prior to making any final decisions so that you know exactly where you would stand.
Would you like to invest in commercial real estate for your business? Whether it’s a new business or an existing company, or you’d like to purchase or lease the property, we can help get you the cash you need. If you’re an annuitant, you can actually sell your life contingent annuities payment stream to us for cash now. When you sell your future annuity payments to Peachtree Financial Solutions, you have optimal flexibility and are in control of just how much money you receive now and how much money you’ll keep as part of your payment stream. If you’re interested in cashing in all of your life contingent annuity payments, that’s also possible. Contact Peachtree Financial Solutions today for more information and for your no-strings-attached quote.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.