Considering buying or leasing commercial real estate? You’re probably wondering which option is cheaper in the long run. We wanted to find out, so we did some research and looked at buying vs. leasing commercial property and the long term costs of each. Here’s what we found.
The length of time matters
How long are you planning to stay at this location? If you know you’ll be there for at least 7 years, buying is the cheaper option (surprisingly). The amount of money you save from buying only increases the longer you’re in the building. Let us explain:
Leasing examples repeatedly show that leasing commercial property costs upwards of $200,000 more than buying commercial property over a 15 year timeline.
Drop that time period down to 7 years, though, and buying and leasing cost about the same amount. If you’re planning to be in your building for less than 7 years, leasing is the cheaper option.
It’s more than just cost
There are more factors to consider than just cost. Think about the upfront costs you’ll be responsible for if you buy instead of lease.
A down payment alone is a huge financial undertaking. Can you afford to tie that money up? Do you need that money to do something for your business instead? How long will this space be able to hold your growing business? Will maintaining the property be a hassle for you?
Another consideration when comparing buying vs. leasing commercial property is the issue of building and property maintenance. When you lease commercial property, the property owners, or landlords, take care of the property and building maintenance.
If you notice that something is wrong, you simply notify the landlord or maintenance worker and schedule a time for them to come fix it (in the best case scenario, as anyone who has rented or leased property before knows).
However, if you’re the owner of the building, the cost and responsibility for all property and building maintenance and repairs falls squarely on your shoulders, in addition to the responsibilities of directly running your business.