Buy or lease ?
By Adam J. Tarantur, CCIM Principal
It’s the age-old question business owners continue to ask themselves: Am I better off buying or leasing my real estate?
And given the current economic and real estate landscapes, with interest rates remaining attractive and still relatively low, and with upward pressures on both lease and sale rates, it’s a time when many business owners are looking for answers.
Unfortunately, no one has invented an app or developed a fool proof equation that makes this an easy question to answer. Real estate decisions are highly individualized and based on a variety of factors that are closely linked to the goals, objectives and finances (business and personal) of the business owner(s).
Generally speaking, if a business requires greater access to capital for operations and/or expansion plans, it may not be wise to tie up a significant amount of cash into real estate (equity, maintenance, etc.). Additionally, if a business is cash poor, it may not be able to even consider buying property, regardless of where interest rates and building prices may be.
At the same time, the ownership of business real estate may be viewed as a form of retirement planning. It may also provide a business with certain deductions and write-offs that are important to the financial standing of the business and its owner(s).
In the right situation, now is a good time to buy real estate. Prices and interest rates remain relatively attractive. Further, financing programs from entities such as the Small Business Administration are making it easier and more affordable than ever before. But the fact remains that businesses should look carefully (with the assistance of a qualified advisor) at their own situation—irrespective of interest rates and acquisition prices—before making a move.