As an entrepreneur, one is bombarded with different questions and decisions to make on a daily basis. One of these queries pertains to fixed assets: Should you buy a retail property for sale or lease one instead? Today we shall help you find out the answer to that by checking out the pros and cons of each option.
Option #1: Buy a Retail Property for Sale
- You have ownership and therefore control over the asset. You don’t have to abide by the rules and restrictions of the owner or landlord.
- You can gain equity. If all the right factors align, the property’s value can be appraised and this value increase shall be seen as an additional worth in your company.
- In some cases, the amount of rental and mortgage payments comes close. With the latter, you gain ownership over time unlike the former.
- It wouldn’t be beneficial if you see your business moving to a new place in a few years time.
- It requires a significant lump sum value to make the purchase happen.
- There are various costs to maintain the asset and keep it functional and valuable.
- Prime locations for sale are more often than not either too pricey or unavailable.
Option #2: Lease a Retail Property
- Many retail assets for rent are situated in prime locations with heavy foot traffic providing maximum exposure of one’s brand and offerings.
- You don’t have to worry about maintenance and repairs cost because that is the job of the landlord. Sometimes though, this can vary depending on lessor-lessee agreements.
- It doesn’t require the use of a hefty amount of cash in one sweep.
- There are risks of moving out even if you don’t want to and losing a good location. At the end of contracts, landlords can replace tenants. Competition is pretty tough.
- You don’t have ownership so instead of being recorded as an asset, the rental costs are recorded as expenses in the financial statements.
Whether you buy a retail property for sale or lease one instead is completely up to you. After all, no two entities are exactly alike. You need to cater to your unique needs so careful analysis should be done before a decision has to be drawn. Consider all variables and factors first.