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Buying vs Leasing Commercial Real Estate

Posted on: April 6, 2020

Looking For Commercial Space In South Florida?

If you are looking for a new commercial space for your business, you may be wondering whether to buy or rent. There are certainly pros and cons of each, so you will have to determine which situation is best for you and your company. Read on for some tips when deciding whether to buy or lease commercial real estate.

Pros of Buying Commercial Real Estate

When buying commercial real estate, you have complete control over the space, within the confines of zoning restrictions. Your mortgage payments will be fixed and can’t change like they could under a lease. You can also deduct several expenses on your taxes, and you may benefit from capital appreciation in the long run. Additionally, you might be able to rent out some of your space to tenants and receive additional income this way.

Cons of Buying Commercial Real Estate

Purchasing commercial real estate can be expensive upfront, as most spaces require a 10% to 40% down payment. You will be held liable if someone is hurt on your property, and you may incur prepayment penalties or have difficulty qualifying for financing. There is also a chance that your value will decline over time and you will face capital loss.

Pros of Leasing Commercial Real Estate

If you choose to lease commercial real estate, you’ll have more flexibility than when purchasing. Qualifying for a lease is relatively easy, and you may have the opportunity to get into a prime location. There are also several costs you can deduct on your taxes, and rent is typically easy to budget for. You won’t have to worry about insurance requirements and the upkeep of the space, giving you more time and energy to focus on your business. 

Cons of Leasing Commercial Real Estate

If you lease, you will not have the opportunity to earn rental income from other tenants. You won’t have any control over the space, and you won’t be able to deduct expenses you may have with a mortgage. There’s no way to benefit from an appreciating asset or build equity on the space, and your monthly rent payments may increase to more than what it would cost for a mortgage.

Deciding whether to buy or lease commercial real estate is a big choice, so you need someone on your side to help. If you’re considering hiring a South Florida commercial real estate attorney, Mark Schecter is one of the best in the business. Contact Schecter Law today to see how we can help.