As a business owner, there are several things you need to consider before you decide to open a business location to cater to customers. You need to run costs, logistics, work with a commercial real estate broker to find the right property, etc.

However, an important part of your strategy also involves deciding whether you want to lease or buy the commercial real estate property. Both options have their respective benefits so you will have to check your preferences and see how either decision aligns with your overall business strategy. Following are some of the key features:

Buying Commercial Real Estate

Buying commercial real estate means you purchase the property’s ownership rights from a seller through either upfront payment or installments.

Pros

There are several benefits of buying commercial real estate property:

  • Value Appreciation– Property values tend to appreciate over time which will increase your overall net worth. You can also gain more than you originally paid for it when you decide to sell it off.
  • Improved Financing Options– Being a property owner will allow you to take more loans since banks will simply use your property as collateral to mitigate their risk.
  • Tax Saving– Commercial Property is  a depreciating asset and the reduction in its real value will allow you to save on Income tax

Cons

Despite being a seemingly lucrative option, there are a few drawbacks to buying commercial real estate as well.

  • Initial Purchase Cost– The initial cost of purchasing the property is extremely high and will need for you to have a significant amount ready to be paid upfront. You will also need to have a bank financing approved business to qualify for the necessary loan to purchase property.
  • Mortgage, Interest, and Monthly Costs– Mortgage ownership comes with sizeable monthly mortgage payments and interest. You will also be responsible for all maintenance needs.
  • Restrictive – Owning a property can restrict mobility because you remain bound to the location unless you have enough money to be able to have two separate owned locations and their respective mortgage payments.

Leasing Commercial Real Estate

Leasing allows business owners to rent the property from the owner instead of purchasing it.

Pros

Following are the main benefits of leasing a commercial real estate property:

  • Affordable– Leasing involves monthly rent payments covering a fixed amount depending on the type of lease agreement. There is no sizeable deposit to be paid initially.
  • No Property Maintenance Costs– Most of the time, the burden of maintenance falls on the property owner instead of the tenant. The only exception to this rule is in the case of Triple Net Lease where the tenant is expected to also cover maintenance costs.
  • Flexible – Leasing prevents you from getting tied down to a specific location. If you find a better option for your business at any point in time, you can choose to shift.

Cons

  • High Rent– The monthly rents for commercial real estate properties may be high for a Class A location and may require you to also cover monthly payments for property tax and insurance.
  • Missing out on Appreciation Benefits– Since you do not own the property, you will not be able to benefit from its value appreciating over time, even if you have been paying rent for a decade.
  • Lack of Property Control – Tenants do not have say or control over possible changes the property owner may make to the property.

Conclusion

To sum up, both buying commercial real estate property and leasing it have benefits and drawbacks. As a business owner, you need to understand what your needs and future plans are and decide your strategy accordingly.

If you are looking for commercial real estate in Rio Grande Valley to buy or lease, please contact us. We have been working in the industry for years and will guide you towards the right decision.