Is it Better to Lease or Buy an Office Space? 2 years ago
When opening a business, finding a location for your office space is one of the biggest challenges. After all, having a business address might also be a requirement when registering a business.
A comfortable space to meet clients, monitor employees, and register your business are important considerations, whether you're starting a new company or growing your existing one.
Buying an office space will allow you to renovate it however you like. It can also be a wise investment if you are confident that you have the money to acquire a commercial property and still have extra to fund the expansion and growth of your company.
On the other hand, leasing an office space allows you to locate itself in a great area convenient for both employees and customers. It is also more affordable than purchasing a commercial property, allowing you to invest funds in other parts of your business.
But before searching for an office, you should carefully consider the advantages and disadvantages of buying or leasing, and here are the things you should know:
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Buying |
Leasing |
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Affordability |
Buying a property is usually sold at a fixed cost and comes with a high upfront cost that will require a certain budget. |
When leasing a property, you are not paying a big one-time fee, but you are paying monthly installments that are cheaper and affordable. |
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Terms of Payment |
When buying a property, it can be in the forms of Cash or Bank Financing |
When leasing a property it is usually settled with Post-Dated Checks and Security Deposit |
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Location |
You can buy a property anywhere you like. However, it will be challenging and will still depend on the availability of the lot you desire |
You can always choose a prime location leased by great land developers. There are more commercial units for lease than for sale. |
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Maintenance |
As a landowner, you will be the one responsible for all the maintenance costs, dues, and real property taxes. |
The landlord is the one responsible for the maintenance and repair costs. |
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Equity/Value |
Owners can grow their equity, especially when the property's value increases over time, and can become a wise investment in case you’re planning to sell it at a higher price in the future. |
As a renter, you don’t build equity, and it is also possible that your rent will likely increase over time. |
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Taxes |
You can apply for tax deductions like tax incentives and mortgage interests. |
The lessee may deduct the amount of rent paid or accrued from gross income for any expenses stated in the lease agreement that must be paid to or on behalf of the landlord. |
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Scalability |
It might be challenging when your business decides to expand or needs to change. You will either have to sell your property or raise another capital for expansion. |
When your business expands, and you have enough budget, you can move to a bigger office and start a new contract. |
Since every business is different, make sure before you buy or lease a property, you thoroughly evaluate and examine your business goals and the budget allotted to help determine the better option.
Also, before you sign a lease, have your lawyer evaluate it to ensure that you are appropriately protected from unexpected costs or liabilities. Make sure you are aware of the terms of your lease to ensure that you can give sufficient notice when you intend to move out.
Meanwhile, regarding the legal, tax, and financial implications of purchasing commercial property and if you are running the place with a partner, you might need to change your legal partnership agreement to include jointly owned property depending on the legal setup of your business.
While there is no right or wrong decision when choosing to either rent or buy a property for your business, having a legal consultant for these matters can help you evaluate the best course of action for your business.
For more business resources, you may always check Digest.ph
AIC Grande Tower Garnet Road
Ortigas Center, Pasig City
Metro Manila Philippines
Mobile No. +639451244898
digestph@gmail.com
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