Should You Purchase Or Lease a Commercial Property?
19 Nov 2019
Establishing a business requires a substantial amount of investment. Right from hiring qualified employees to investing in well-equipped infrastructure, you may have to take care of all the aspects related to establishing a business. Moreover, if you already own a business and you are looking forward to expanding it, you may have to look for a bigger and better place for your office. While moving into a new place, most business owners have confusion regarding whether to buy or lease the new commercial property. While making the decision of either leasing or purchasing the commercial property, entrepreneurs should take into consideration various factors such as the estimated growth of the business, legal requirements and the total turnover of the business. This can help them make a well-informed decision whether buying or leasing a commercial property would be beneficial in the long run. There are several advantages of leasing or even purchasing a commercial property. Firstly, we will discuss some of the major advantages of purchasing a commercial property:
Advantages of purchasing a commercial property
Equity and control over the property
If you happen to purchase a commercial property, your ownership in the property would increase as you repay the loan amount along with the interest. By purchasing a commercial property, you can avail secured business loans for future financial needs by pledging your property as collateral. Moreover, purchasing a property gives you complete control over the property. This is extremely helpful when you plan on making significant renovations to your commercial property. Lastly, owning a property also gives you the luxury to conduct your business flexibly.
Increasing property value
With time, the valuation of your commercial property may increase due to social infrastructure or the improving demographics of the area. This can prove to be extremely beneficial in the long run as you can consider selling the property and utilizing the profit to fund other work or personal goals. Moreover, by purchasing a property, you can also save on the rental outgo by purchasing a commercial property.
By purchasing a commercial property, you can also enjoy various tax benefits. If you avail a loan for purchasing a property, then you can also avail tax deductions for the interest paid on EMIs. This can help you save a large amount of money in the long run.
Advantages of leasing a commercial property
No down-payment and lower maintenance costs
You can either lease a commercial property for either a short-term or long-term depending upon your business requirement. Since leasing a property doesn’t require huge investment, it keeps your funds more liquid. These funds can be utilized for other business purposes.
When you lease a property, you don’t have to take care of its maintenance. The repair and maintenance of the property would be taken care of by the landlord.
If you lease a commercial space, you get the flexibility of moving into a new location when your lease is up. Moreover, you wouldn’t be bounded by a loan if you opt for leasing a commercial property.
If you have a low business credit score, availing a loan to purchase a commercial property can be difficult. Additionally, in case the lending institution agrees to sanction the desired loan amount despite your low credit score, they might charge a significantly higher interest rate. On the other hand, you can easily lease a property even with a low credit score.
Unaffected by declining property prices in the locality
If you purchase a commercial property and the property’s value decreases over time, you may have to bear a significant loss. On the other hand, if you lease a commercial space, you would be unaffected by declining property prices in the locality.
Buying vs leasing
The decision of whether to purchase or lease your commercial space comes down to your preferences. Purchasing a commercial property is a good option is equity building and resale are important to you. Moreover, you may consider purchasing a property, if you fail to find a suitable property to lease. Your first priority may be to lease a property, but if you don’t find a suitable property on lease, you can consider purchasing a property that best suits your business requirements. However, before purchasing a commercial property, make sure that you assess your financial capacity beforehand. Whereas, leasing is a good option if you wish to have the flexibility of moving into a new location. It is advisable to prepare yourself for rent hikes if you are planning to take your office space on lease.
Now that you have a better understanding of both buying and leasing a property, ensure that you make the right choice while looking for a commercial space for your business. If you opt for purchasing a commercial property, make sure that you have a high credit score. A high credit score will make you eligible for a higher loan amount at a comparatively reduced rate of interest. This can reduce the overall cost of borrowing and help you save a large amount of money in the long run. With reputed lenders, you can avail a loan through a hassle-free online application process. Minimal documentation, flexible repayment option, instant approval and quick disbursal of the loan amount are some of the added advantages of availing loans with a prominent financial institution. Also, calculate your loan eligibility beforehand to avoid the chances of rejection of your loan application
With Leading Non-Banking Financial Companies (NBFCs) like Finserv MARKETS, you can check your eligibility for a home loan with the help of an easy-to-use online eligibility Calculator. Just by providing a few basic details, you can calculate the loan amount and avail the loan at a comparatively lower interest rate. You can also customize your loan depending upon your needs and requirements. So if you are looking for a loan to buy a commercial space, Finserv MARKETS can certainly be a great financing option. Lastly, read the terms and conditions of the loan agreement carefully before signing it. This will help you avoid any inconvenience in the later stage.
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