Buying and leasing office space offer different advantages - bizjournals:

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Buying a property represents amuch longer-term financial commitmen t than leasing and, as such, requires a realisti assessment by the potential purchaser of the company’s futures prospects. Companies anticipating significantf growth need to decide whether to purchase property that is large enouguh to accommodate growth and whether they can leasee unused spaceuntil it’s needed. The potential rental incomr that leasing unused space coulcd generate should be taken into Space is less of an issuer when leasing anoffice since, if it becomeas too small the company has the optioj of not renewing its lease.
That flexibility also can be useful if market changes show that a move to a differenrt location would be On theother hand, renters can be facedd with unwelcome disruption should the landlordd decide to terminate the lease. Purchasing requires more cash up frontgthan leasing. The initial outlay when purchasing includes a substantial down payment as well as the cost of inspectionzand appraisals, loan-related fees and other closing costs.
The upsidwe is that, in contrast with a firm that leases space, the purchaser will own an assetf that can besold — hopefully at a According to online office spacs referral and information networ k OfficeFinder LLC, business owners purchasing officer space can expect to make a down payment betweehn 10 percent and 25 percent of the purchasr price. By comparison, the up front cost involved in leasingf a space usually is limiter to just acouple months’ rent. Another factor potential buyers should consider is the effect of the down paymen t on working capital available to financeethe company’s growth.
A number of othedr issues should factor into the buyint orleasing decision, such as taxes, maintenance costs and potential interest and rental rate changes. Renters, for example, usuallu don’t have to worry about regular maintenancer costs, which are normally the responsibilityt of theproperty owner. However, should they wish to make significanrt alterations to theleased space, they can do so only with the landlord’s consent. Property owners, on the othe r hand, are free to make whatever changes they Purchasers also have the advantage of knowinf in advance what their future monthly loan paymentswill be, especialluy when they have a fixed-rated loan.
Tenants, on the other are likely to face regular increasesx in rental rates and need tobudgegt accordingly. Leasing initially may look like thecheaperr option, said Tim Hatlestad, president of the Certifiexd Commercial Investment Member Institute, but to help reach a business owners should carry out an after-tax analysie to determine what can be writtenb off, as renting and buying offer different benefits. “If everythiny else were equal, then you have to look at the optionwafter taxes,” Hatlestad said. “The after-tax through a number of measures, will tell you what costd less.
” Property owners, for example, are eligible for deduction s ofproperty taxes, mortgagew interest and depreciation, while those who leaser office space usually can deduct the full amoungt of the rent as a business Jim Osgood, CEO of said the stage a businessa is in can be an important factor in determining whether to buy or A more established business should consider buying office he said, since anticipated growth is easietr to predict accurately. A on the other hand, would probably be betted to leasean office, as it woulcd provide greater flexibility and fewerd constraints to growth.
“I don’t know if it’xs a good idea for a startupo to purchase real estatrebecause there’s a lot of uncertainty about whethet the business will be trulyh successful or not,” Osgood Osgood said business ownera should look at three possible scenarios — optimistic, realistic and pessimisticv — that pit anticipated property appreciatiobn against cost factors to help them reacuh a decision.