Business Owner’s Dilemma – To Buy or to Lease

Kelly L. Macdonald | October 22nd, 2017

It is a classic question confronting business entrepreneurs when they first open shop. Is it better to buy or lease your first commercial property? Since every situation is unique, the best thing to do is to start with a detailed business plan and then sit down and review all options with your Realtor and financial advisor. If your plan provides for sufficient funds to place a down payment on a purchase of property, you may wish to include a mortgage loan professional in your discussions.

The answer to the question will emerge from a detailed analysis of your current financial situation, cash on hand, short and long-term business plans, type of business and your risk tolerance. A buyer takes on a higher level of responsibility for maintenance and upkeep of a property but in return, stands to benefit from any increase in equity in the property over time. A renter will also have to share in the cost of maintenance and repair of the property, through rental payments under the lease, but will not stand to gain from appreciation. The advantage for renters lies in freedom from the full weight of responsibility for property ownership and the ability to pull up stakes and downsize or upsize when the need arises.

New business owners need to maintain flexibility in today’s dynamic markets. Absent a crystal ball, it is impossible to predict how fast your business will grow. If growth exceeds initial expectations, you may find yourself in need of larger space in just a few years. That’s a good problem, but a problem nevertheless if you are tied to a building your own in a buyer’s real estate market.

For many business owners just starting out, leasing is the best option. It provides the flexibility a start-up business needs and allows you to focus attention on growing your business. Later, if things go according to plan or exceed expectations, you may consider buying real estate and even becoming a landlord in addition to a business owner. The potential equity you build as a landowner can be used to offset losses sustained in business downturns and vice versa. The equity in your real estate can help you survive lean times in your business venture.

Diversification is the building block of success for many entrepreneurs. Start small and keep things manageable, but always think big! The future belongs to you.

Are you buying or selling a home in Calgary? Do you want an agent who has the enthusiasm and energy to get things done, with your best interests in mind at all times? Contact me at 403-617-8758, kelmacdonald@gmail.com or www.kellymacdonald.ca and let's make good things happen!

 

 

About Kelly Macdonald

Kelly Macdonald is a Realtor® with The Real Estate Company in Calgary, where she has been living (and loving it!) since she was 10. Kelly offers her clients a unique mix of youthful vigor, creativity and technical and design savvy on one hand, and professionalism and transactional expertise from her business degree and strong administrative background on the other. Kelly is also a devoted wife and mother of two, with whom she finds time from her busy schedule to play scrabble and walk by the beautiful lake of their home in Southeast Calgary.