Business property - should you lease or buy
So your space needs have changed. But is it smarter to buy or lease? Consider these tips:
Consider the long-term cost.
A lease may sometimes beat out a purchase in terms of cash flow, particularly in the early years. But over the long haul, a purchase is usually cheaper because a landlord, in addition to paying all of the costs associated with purchasing and maintaining the property, will attempt to build in a profit for himself.
Location, location, location!
Location is extremely important for many retail and service businesses. If you have an awesome location, you don't want to lose it because of a rent escalation or because the landlord wants the property for another use. If you own the facility, you won't have these worries.
If you'll be in an area where land values are likely to increase, it would likely be better to own the property - and get the benefit of appreciation if you should ever sell.
A purchase may help with tax savings.
Unlike rent, the money you use to purchase your facility is not deductible, but you are allowed to recover this outlay over time by yearly depreciation deductions. If you financed your purchase, interest-paid deductions also are available. Depending on several factors, such as how long you have been in business, how profitable your business has been, and what portion of the purchase price or rent relates to the land itself — rather than to buildings — a purchase may actually cut your tax bill when compared to a lease.
We can help
We have the tools you need to manage your money well. Visit one of our branches or call 1-800-288-3425 to learn how we can help you keep your business growing.