When faced with a decision of whether to lease or buy office space, there are a lot of questions that should first be considered. As with any real estate transaction, good planning is essential in order to ensure that the best decision for a company is made when looking into Dallas commercial real estate to own. The current economy has certainly made buying seem a bit more appealing, with real estate prices lower than they have been in a long time; however, that still does not necessarily mean a company is ready to take on such a large liability.
Doing some homework ahead of time with the help of a business loan manager or other financial specialist can help get an idea of which scenario would be better at this point of time. Following are some valid consideration about leasing versus buying.
The pros and cons of leasing versus buying commercial real estate are fairly straightforward and probably the same for most companies. In terms of leasing, the pros would be: no need for a large capital expenditure; not having to get a business loan which can be both time consuming and difficult; elimination of many responsibilities regarding the property other than paying a monthly lease and any other agreed fees; and tax benefits of being able to claim monthly rent as a business expense.
Cons when leasing are that the rented space is always subject to rental increases; having to relocate when a lease ends; and facing other decisions made by the building owner, all of which are not controlled by the lessee.
Buying has many good points as well. A company would have full control of owned Dallas commercial real estate including: the ability to make changes and modifications as desired; option to sublet space for more income; room for business growth; no more rent increases; tax deductions on loan interest and real estate taxes; and the possibility of property appreciation.
Some of the disadvantages to owning that could be significant are: needing a large amount of capital to make the purchase; proving that the business is viable and profitable in order to get a loan; responsibility for complete maintenance and repairs on the building; and possible depreciation of the property value over the course of the loan.
In order to get an idea as to which option might be better, a few key points about the company should be examined, both now and in the future, including: performance of a cash flow analysis to get a clear idea of current and future projections; is company growth steady or sporadic; will growth be continual and profitable; does the building being considered have room for future growth; and how will tax breaks, insurance prices, and maintenance costs affect profitability?
Extremely important is finding out what kind of loans are available to a specific business, as sometimes getting a loan can alone dictate the ability to shoulder the financial burden. In the past few years, it has become increasingly more difficult for companies to obtain affordable loans and that point alone could answer a purchasing question.
Any real estate purchase is one that can be the best or worst decision ever made, whether a home or a business; however, it can sometimes be harder for businesses to get out of tight money situations. Therefore, as time-consuming as it is, taking all the necessary planning steps can help dictate when a company should lease or whether it is the right time to actually own its own Dallas commercial real estate. A more established business with a solid foundation to commit to a major expense such as commercial property purchase is usually better equipped to handle such a purchase. Any company could lose money owning or continuing to lease; there is no guarantee either way. In the end, the right decision will be different for every business and every situation!
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Do you need an expert firm to help you with your Dallas commercial real estate? LCRG (Laughlin Commercial Realty Group) at 214-526-2626 are experts in this area and can assist in locating a great space for your building needs!