Should you lease or buy office space? | SupportBiz

Managing Growth

Should you lease or buy office space?

 
Every potential entrepreneur, at some stage, needs an office space to further his business. At this stage, one question inevitably stares the entrepreneur in his/her face – whether the office space should be leased or bought?

Both leasing and buying have their own positives and negatives. SupportBiz lists the pros and cons of both alternatives so that you, as an entrepreneur, can take the right decision. 

Leasing your office space

The pros:

Free working capital

Taking an office space on lease frees up your working capital, as your money is not tied up in property. You can use your working capital for business purposes, to grow and develop.

Moreover, leasing an office space means ease in borrowing funds from banks or financial institutions, if the need arises.

Free time

If you lease an office space, you are free from the stresses that come with the ownership of property. This, in turn, frees up your time, and leaves you better able to concentrate on running your business.

Benefit of location

Leasing gives you the option of being able to have an office in a posh location, where you might not be able to buy a place of your own due to extremely high costs. The location of your office is of prime importance in certain domains, such as retail and restaurants.

The cons:

No investment

At the end of the lease period, the property reverts to the leaser. You are left with no investment in real estate.

Variable costs

There is a possibility of an increase in the lease costs at any stage. There are chances of your being put in a spot if the lease rent increases, which could be due to several factors.

Buying your own office space

The pros:

Possibility of appreciation

When you buy your own office space, you invest in real estate, and there is always the option of selling it off at a later stage. If the property appreciates in value, you stand the chance of earning a decent profit on the sale.

Fixed costs

Having your own office space gives you, over time, an idea of the costs that you will have to incur in running and maintaining it. These costs will largely remain fixed, and not change drastically, unless and until there is a drastic change in the factors that determine them.

Possibility of renting

You have the option of renting out a part of your office, if you have extra space. This helps you earn additional income, which you can choose to use for the benefit of your business.

Tax benefits

You get tax benefits if you invest in real estate by buying your own office space, an option that is not available in case you lease it.

The cons:

Increased stress

Owning your own office comes with its own set of stressors. You, as the business owner, are responsible for all the decisions concerning it, and this causes a lot of stress, demanding a lot of your time and attention.

Lack of flexibility

Buying your own office space does not give you the benefit of flexibility. It makes things difficult if you want to move into a bigger office when your business grows. Also, it makes it tough for you to shift to an office in another location if you want to.

Heavy expenditure

Buying your own office involves heavy expenditure in the initial stages, especially if you are thinking of buying a space in a prime location. Your financial condition should allow you to buy the property, or take a loan from a bank or a financial institution.