The Benefits of Leasing Your Office Spaceby: Confilabs
Everyday many entrepreneurs and small business owners struggle with the issue of whether it’s more advantageous to lease or buy office space. This can be a confusing issue especially since there really isn’t a “one size fits all” solution. An experienced professional real estate broker who has worked with a wide variety of businesses and situations makes them well equipped to find the most appropriate space to suit your business’s needs. If you know you’ll remain in a location for ten years or more, then it’s a good idea to purchase a property, but projecting ten years into the future is difficult. A good broker can perform a lease vs. purchase cost analysis to help you make an informed decision. Checking with a tax consultant will ensure your decision is beneficial from a tax perspective. Specialized industries with heavy or unique infrastructure requirements like manufacturing firms are better off buying their work space. But if you’re a new business owner, you have to start somewhere.
New business owners typically lack sufficient capital to purchase their own building. In fact, statistics show that most new business owners start out leasing rather than purchasing work space. Business consultants say this is a smart move because it’s better that the business get on its feet and operate in the black before making such a big purchase.
One of the benefits to leasing business property is flexibility. If your business expands, you’ll need more work space. When your lease is up, you can move to another office that’s better suited for your business and your budget.
With leasing you have fewer responsibilities. Depending on your lease, your landlord or property manager is responsible for certain management issues, remodeling, security and maintenance.
If your lease is a true lease and as long as the Internal Revenue Service recognizes it as such, lease payments are considered deductible as operating expenses. At the end of the year, this is the equivalent of a 33% discount on your rent, putting money in your pocket to grow your business.
Another benefit of leasing your business property is no mortgage. New business owners are typically cash poor. When you’re not locked into a mortgage loan you have more wiggle room to put cash where it’s needed.
Don’t forget about tax credits either. The federal government offers an investment tax credit, a dollar-for-dollar reduction in income taxes, equal to 10 percent of the cost of equipment in the year the equipment is used. Though the lessor almost always takes the tax credit, the savings allows the lessor to extend the benefit to the lessee in the form of a reduced lease payment.
And speaking of taxes, if you lease your work space, you’ll have less paperwork come tax time. Income taxes are much more complicated for building owners than they are for lessees.
When you lease your business space you usually need one or two months of payments before moving in. But purchasing a building requires between 20 to 25 percent of the property’s price for a down payment plus mortgaging the remaining balance.
Working with an experienced professional real estate broker who can perform a lease vs. purchase cost analysis will help you to make an informed decision about which scenario best suits your business situation. There are several benefits to leasing work space especially for new business owners who are strapped for cash.