Renting Vs Buying an Office Space

Sakera Patel S

Introduction

A common question that many entrepreneurs have when they start their own business is whether they should rent an office space or buy one.  If you’re considering renting or buying an office space, you probably have a lot of questions and concerns, especially if you’ve never done either before. However, it’s important to look at both sides and weigh the pros and cons of renting vs buying an office space before making your decision. This guide will help you determine whether renting or buying makes the most sense for your specific situation, so you can choose the best option possible.

Advantages of renting an office space

Don’t have to put down any money upfront: The biggest advantage of renting is that you don’t need to put down any money upfront, which could save you a whole lot of money in startup costs. You can simply negotiate a short-term lease for six months to a year and grow into it. The more business grows, it becomes possible to convert that office space into its property. In some cases, companies find it more affordable to start with a rented place until they achieve profitability. When Rent vs Buy is A Matter Of Dispute: Most business owners who buy commercial real estate cite high prices as one key reason.

Access to prime properties and flexibility:  If you’re willing to invest in a commercial property, you have access to more high-quality office spaces than if you rent. You can also avoid signing a long-term lease that locks you into one location for years. Instead, most landlords will offer month-to-month leases so that they can find another tenant quickly if your business doesn’t work out. When Rent vs Buy Is A Matter Of Dispute: Many business owners who rent cite flexibility as one key reason. They don’t have any long-term obligations or commitments when it comes to their office space, which allows them to move locations quickly if needed.

Limited responsibility:  If you rent, you don’t have to worry about repairs or maintenance. You can also take advantage of your landlord’s insurance policy to protect your business from damage or theft. When Rent vs Buy Is A Matter Of Dispute: Many business owners who buy commercial real estate say that it’s cheaper in the long run to maintain a property than it is to pay rent on a space that needs expensive repairs.

When Rent Vs Buy Is A Matter Of Dispute: Business owners who buy commercial real estate often cite appreciation as one key reason for buying.

Disadvantages of renting an office space

Brokerage: You will have to pay a broker fee when you rent an office, which can be anywhere from 10% to 15% of your annual rent. In contrast, if you buy your own office space, you will not have to pay a broker fee. The only time you would need to pay a broker fee is if you are buying real estate for investment purposes. If that’s not your case, then it’s likely better for you to buy instead of rent. Lease Terms: When renting an office space, lease terms are generally short-term (1 year or less). This means that every year, or even every month in some cases, there will be additional costs associated with renewing your lease agreement.

No Equity build-up:  If you rent, you will not have any equity built up in your office space. In contrast, if you buy, you will be building equity as time goes on. This is a very important factor to consider when thinking about long-term financial goals. For example, if your business becomes very successful and you want to sell it for a large sum of money, then owning your own office space would be ideal. You could use that money to buy another property or invest in other assets that can help secure your financial future.

Rent revivals: At renewal time, you may be presented with lease agreements that can cost significantly more than your original agreement. This is known as a rental revival, which means that all landlords have the right to request higher rent payments at any time during a lease term. In some cases, these price increases can be quite substantial, when compared to previous rent amounts. These increases aren’t always predictable and they may happen on short notice. If your business is experiencing financial difficulties when lease renewals roll around, then you may have to pay much more than you originally intended to spend on rent.

Advantages of buying an office space

A lifetime asset:  You’ll own your office space, so you can use it for any purpose. You don’t have to worry about whether you’ll be able to renew your lease or find a new location when it expires. And if you sell your business, you could recoup some or all of your investment. 

Tax benefits:  You may be able to deduct interest on a mortgage, property taxes, insurance, and depreciation. This way you can increase your savings.

Rent a part of it: If you decide to rent a part of your office space, you can get a steady stream of income.

Open to changes: You can make changes to your office space as you see fit. If you’re renting, it may be more difficult to modify your office space.

Disadvantages of buying an office space

Large capital: Buying an office can cost you a lot of money. You are also in charge of maintaining and running it, which is more work than you’d think. 

Another drawback to buying your own office space is that if you ever want to sell it, you’ll likely lose a ton on resale. Most people who buy their office buildings are business owners looking to expand or move into something new; they’re not interested in selling their investment anytime soon! 

Commitment to the location: Another con is that buying a building can lock you into a location—but with most leases lasting 3–5 years, there’s not much short-term risk with that caveat in mind.

What’s better?

Both buying and renting have their own pros and cons. Before making a decision, it’s a good idea to weigh them all out.

For example, if you have enough cash on hand to buy your office space, there’s no reason not to. It’s a wise investment that could earn you more money in the long run. But if you don’t have enough money for a down payment or don’t want to deal with property management companies, then renting might be your best option. 

In either case, make sure you do your research and understand what comes with each option before making a final decision.

Conclusion

The key to success in any venture is your ability to make smart decisions, take calculated risks, and control your own destiny. Make sure you understand all aspects of renting vs buying before making a final decision. If you find that it’s more financially beneficial to rent than buy then do so. However, if buying office space is right for your business there is no reason why you shouldn’t go ahead with it.

The most important thing is that you have a clear vision for where your business wants to be in 5 years, know what steps are required for success, understand how much effort will be required from yourself to achieve those goals, and once that happens everything else should fall into place. If you still require more clarity, you may write to info@roodland.com.

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