Sarnia Real Estate Agent - Homes

In today’s marketplace with financing still quite affordable, a lot of tenants are considering purchasing a building or land to construct a building.  There are many advantages and disadvantages to buying a property for your business.  We will briefly go over some of the advantages and disadvantages of leasing and buying and show how we can assist you in deciding whether to buy or lease.

LEASING:

Advantages:

• Availability of Cash – most leases have fewer restrictions then loan financing.
• Financial Flexibility – it may be more prudent to use your financing capabilities to run your business.
• Stability of Costs – Lease payments are a continual annual outlay.
• Spatial Flexibility/Mobility – Leasing can provide more flexibility if a business expands or contracts.
• Location – Leasing can allow you to be at a premier location that might otherwise be unaffordable.
• Focus – Leasing allows concentration on your primary business.

Disadvantages:

• Cost – Sometimes for companies leasing can be more expensive then owning.
• Contractual Penalties – You may not cancel your lease without penalty, should your business change.
• Appreciation – You do not participate in any appreciation in value of the property.
• Control – You have no control over the other tenants, business amenities or building improvements.

OWNING:

Advantages:

• Property Value  Appreciation – The owner of the property is entitled to all of the appreciation in value.
• Equity Accumulation – Each monthly payment builds your equity in the property, and reduces debt.
• Income – If a portion of the property is rented, income from users can pay the mortgage on the property.
• Control – The owner has the freedom to operate the building as it sees fit, within the limits of the law.
• Tax Savings – Owner may be entitled to tax savings resulting from capital cost allowance deductions.

Disadvantages:

• Initial Capital Outlay – Down payment may divert cash that could be used to finance your operations.
• Financial Liability – A mortgage loan can affect your balance sheet and could impact future borrowing.
• Risks – Potential property damage, obsolescence and inability to sell at a preferred price.
• Inflexibility – Space may be inflexible and cannot be enlarged or reduced depending on business fluctuations.

SHOULD YOU LEASE OR BUY?

Before determining whether you should Lease or Buy, we recommend that you consider all the costs and any other factors that could impact your decision.  We would be happy to sit down with you and complete a needs analysis and discuss the decision in more detail.  With some basic assumptions, we can provide you a detailed analysis of the costs of leasing versus owning and show you based on your preferred discount rate which route you should consider taking.