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More Benefits and Disadvantages of Buying Versus Leasing Commercial Real Estate

Posted on: April 22, 2016

When running a business, at some point you may have to make the decision of buying or leasing commercial real estate. Before you make this choice, it’s advisable to meet with a South Florida commercial real estate attorney, because it’s one of the most important decision for your business and it can have a wide range of implications.

There are some significant benefits and disadvantages to buying over leasing and vice versa, and we’ve discussed many of them in the past, but below are a few more to consider.

Leasing generally has lower upfront costs

In the majority of cases, you can expect your upfront costs to be significantly lower when you lease a commercial property. You may have to pay for a security deposit which is usually about one month’s rent, you may need to pay a broker fee, and it’s a good idea to hire a South Florida commercial real estate attorney for lease negotiations or assistance with closing. You may also have to pay for pre-lease inspections as well, and inspections are advisable in many cases.

When you buy commercial real estate you can expect significant upfront costs

Buying commercial real estate involves much higher upfront costs. You’ll need to pay more in due diligence fees including attorney fees, permits and inspections and other legal costs for getting your building ready for your specific business.

When you lease, many of these costs are managed by your landlord. Closing costs add more fees upfront including appraisal fees, bank fees, and other transaction fees. Most significantly, you’ll have a large down payment, as many commercial real estate purchases require around 20% down. In total, your upfront costs when buying a commercial property can be 5 to 10 times more than leasing or even more.

When you don’t have the capital, you may want to lease

Leasing makes a lot of sense when you’re starting a business with a smaller amount of capital. It’s a good decision for a startup or a new business and it even makes sense for established companies that are expanding to a new location and don’t want to spend a lot of money initially.

There are other benefits and disadvantages to leasing versus buying that Mark Schecter, an experienced South Florida commercial real estate attorney, can advise you on. Contact Schecter Law today at (954) 779-7009 for a consultation.