Owning your own business property is great!
But is it right for you? With sizable cash investments for down payment, and no flexibility for relocation when your business grows, you may want to reconsider.
If your business is a new venture, you do not know the extent or how long of time it will require for the business to flourish. You may find that a different location, possibly on a more visible roadway, would be a major benefit. However, the additional cost of that more desirable site may not be in the original budget. If you own the property, you may have issues regarding the additional overhead of the new site while liquidating the old one. You may not have experience in marketing, the time to show the property to prospective buyers, or the patience to wait for that serious buyer. Simply leasing the site would eliminate these issues.
Few business owners consider their companies ability to obtain credit for business growth. Businesses have credit ratings and maximum credit abilities, just like a person. Having a real estate loan is a large obligation. It will be a major factor in bank approvals due to the business debt to income ratio.
Tax advantages of leasing your site may be the biggest advantage of all! Whereas, we are not tax consultants and you should verify all information with your tax advisor, leasing your site provides some immediate tax and capital advantages. If you own your site, you are able to deduct the interest on the loan and building depreciation. Always remember that depreciation is not really free money. It is a credit in advance for future repairs that will be required, and some with large costs such as roofs. When leasing your site, you have a full deduction for the total lease amount paid. Same site, but leasing will normally generate a much larger and immediate tax credit.
A lease will normally allow immediate access to the building you need. No waiting for Bank approvals, appraisals, and underwriting approvals. The amount of cash required is a fraction of a Real Estate purchase down payment. You should be able to start or move your existing business with very little effort.
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