When you're in the market for office space for your business there are a few things that you should think about before making this investment.
With ever-changing U.S office vacancy rates and stock markets, it is uncertain what the future may bring. You need to carefully weigh the pros and cons of leasing or buying office space. And, you should consider a few things about purchasing office space.
One thing you should consider is whether to lease or buy office space. Here are some pros and cons of leasing vs. buying.
Pros of Buying an Office Space
- Tax Deductions - the associated costs of owning and running a commercial space can provide expense deductions.
- Fixed costs - locking in your commercial mortgage can give your business clear, fixed costs.
- Additional income - owning your office can add the advantage of renting out extra office space and adding more income
- A Retirement Fund - the prospect of owning commercial space allows the owner to sell out and fund their retirement.
Cons of Office Space Buying
- Upfront Costs - buying space usually costs more money upfront which is not practical for new businesses and entrepreneurs.
- Lack of Flexibility - a new or growing business may experience unexpected needs in the future.
Pros of Office Space Leasing
- Free-up Working Capital - with your money not tied up, your business can respond to opportunities in the market.
- More Time- allows more time to focus solely on running your business.
- Prime Property- leasing allows opportunity to be in a great location with a high image.
Cons of Office Space Leasing
- Variable Costs - when you lease you may be subject to annual rent increases and higher costs at the time when your lease expires.
- No Equity - When you lease you are funding someone else's retirement with your lease payments.
There are pros and cons to both buying and leasing. Making a decision will come down to finances, tax, and personal issues.
Here are some simple tips and things to think about before investing in office space.
- Decide How Much to Invest
When considering how much money you should invest in your office space you should think about your present house needs, how much you can afford, and whether you wish to use this space as an investment vehicle.
- Think About Timing
When is the right time to buy or lease an office space? Factors to consider are your personal situations, and "market timing." Market timing is your judgment of whether the market will be going up or down.
Spring and fall usually have greater market activity, and a wider choice of reasonably priced properties for sale, than summer and winter. However, looking back over many years it is clear that no season is predictably the least expensive time to buy in this area. Sometimes the best time to buy is when nobody else is looking. A little-known secret is that there is usually a noticeable drop in prices at the end of December, creating an opportunity of which very few buyers take advantage.
When looking for an office space the most important thing is that you consider the long run and the needs of your business.