Buy or Lease Your Office Space?

The American Dream is often synonymous with property ownership, specifically homeownership. This common knowledge which nearly every American understands that investment in real estate is among the best ways to improve quality of life and secure one’s financial position should extend, too, into our entrepreneurial and commercial pursuits. Investing in ourselves and our businesses by owning office space, rather than leasing has never been a better idea than it is right now; NOW is the time to buy!

Like homeownership, owning commercial property protects a business from rent increases, limits on hours of operation or activities, or having to relocate at the end of a term. Rent is deductible as a business expense, but so, too, are mortgage interest payments, annual depreciation, and property taxes. A mortgage is a fixed cost that can be budgeted, is not subject to rent increases, and is actually an investment from which you can expect a return, one that may later fund retirement, rather than the landlord’s retirement!

True, economic down-times often prove to be the hardest times for businesses to put together cash for a down-payment; however, these are also the times when businesses have the most to gain. Mortgage rates are at record lows and commercial property values are at their lowest point in nearly a decade. This is a frightening prospect for owners of real estate, but the savvy investor realizes that, in the long run, land always appreciates, and real estate values always go back up. To quote Warren Buffet, the key to success is to be greedy when others are fearful [and] be fearful when others are greedy. Far from being greedy, taking a bold step can actually be prudent. If the economy enters a period of inflation, as many experts expect, real estate will hold its value, even as the dollar loses value. In time, a dollar invested in real estate will be worth much more than a dollar held in cash or bonds, and probably more than a dollar invested in stocks.

While landlords tout leasing as a benefit to businesses because of the flexibility to quickly and easily relocate, ownership comes with flexibility benefits of its own: owners can make cosmetic and structural changes to the location without requiring approval, and owners can also sub-lease any extra space, which can provide extra income during down-times. Potential renters often fear becoming their own landlord because of maintenance and property management costs and responsibilities. These fears can be allayed by purchasing property that is maintained by an owners’ association. In this way, the responsibilities are hired out and the costs are shared.

It’s a buyer’s market: mortgage rates are low and property values have nowhere to go but up!

by Jennifer Kahmann, Administrative Assistant, The B.O.L.D. Company