Whether you currently own a business or are just starting up a business, you might be wondering whether it’s better to lease or buy commercial space for your business in Calgary. It’s a tough choice and there are pros and cons to both sides of the coin. Leasing is convenient, but you’re subject to the leasing terms of the contract with the owner which can be a hassle. On the other hand, buying commercial space is not only a big commitment but a huge investment of capital.
Your decision will be based on many factors. You will have to consider the capital you have on hand and consider future projections of how well the real estate market will fare. Choosing between either buying or leasing commercial space will take careful planning and must consider all the factors that relate to your business as there are advantages and disadvantages that may impact not only your decision but the success and well being of the business itself.
Let’s look at each separately to help you with the decision process.
Pros of leasing Commercial Space in Calgary
• Can be very advantageous if you’re starting a business and need to be worried about cash flow.
• Your monthly lease can be used as a tax deduction.
• Don’t have to be concerned about selling the business if you have to re-locate to a bigger premise.
• You don’t have to worry about the commercial property market if there is a downturn in real estate market.
• May be allowed to sublet to a new tenant if this is contained in the contract.
Cons of Leasing Commercial Space
• Rents can increase and fluctuate dramatically on an annual basis depending on the market conditions.
• You are confined by the restrictions outlined in the lease agreement.
• You may be required to move when your lease expires which severely hamper your business.
• You don’t have the advantage of building up equity in your property.
Pros of Buying Commercial a Property
• Don’t have to worry about paying rental increases as your mortgage is a fixed expense.
• You can take the interest on a commercial property and use as a tax deduction.
• Can use annual depreciation as a tax deduction.
• You can remain at your location indefinitely.
• Allows you to make any physical alterations that suit the needs of your business.
• You are not restricted by the business hours you keep.
• If you have excess space, you can lease that out to tenants and earn extra income from rental money.
Cons of Buying a Commercial Property
• You will have to have a lot more money on hand to use as a down payment on the property so you can qualify for a mortgage.
• As an owner, you may lose equity if the property values decline.
• Owners of commercial property will have to spend more time being concerned about the maintenance and operating expenses of the building.
• Will be responsible for more legal issues such as liability insurance for example, and regulations such as zoning and by-law issues.
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