One of the most important decisions that business owners in Michigan and around the country make is choosing whether to lease or buy the commercial real estate they will occupy. Financial considerations are often at the forefront when these decisions are made, but there are several other important factors that entrepreneurs would be wise to consider as there are advantages and disadvantages to both approaches.
The benefits of buying commercial real estate
Purchasing retail, office, warehouse or manufacturing space allows businesses to enjoy a fixed monthly overhead while reaping the rewards of commercial real estate appreciation. Interest rates have been relatively low for several years, and mortgage payments do not generally increase once loan documents have been signed. While property owners are responsible for maintenance, repairs and improvements, they do not have to deal with landlords who sometimes cut corners in these areas. Business owners who wish to expand or refinance their debt can use the property they own as collateral, and they can lease any unused commercial space to other companies.
The advantages of renting commercial space
Leasing commercial real estate can have advantages both when business is good and when times are difficult. Commercial values can plummet during a recession, but that is not something that business owners who rent the space they occupy really have to worry about. When business is booming and more space is needed, renegotiating a lease can be far easier than selling a property. Leasing could also be less costly once expenses like property taxes, maintenance and repairs are factored in. Business owners who rent space do not usually have to come up with a large down payment, which means that they could have more money available to grow and expand their businesses.
Considering the legal implications
Attorneys with experience in this area might help business owners decide whether buying or leasing commercial real estate would be more prudent, and they may explain the legal responsibilities of property owners and tenants. Attorneys may also scrutinize commercial leases or loan documents before they are signed to ensure that their clients fully understand their rights and responsibilities under these agreements.