The Case for Renting
Renting has its advantages. As a renter, you could, for instance, take advantage of economic downturns by locking in low rental prices in your lease. Additionally, the only money you’ll need upfront is your security deposit. Beyond that, you’ll be good to go until the rent is due. There’s no down payment, loan fees, appraisal costs, building inspections, or anything else. Renting is the simpler and more versatile choice, which makes it perfect for startups and small businesses.
The Pros of Owning
Owning your office gives your company stability. It breathes the air of certainty into your organization. When you are your own landlord, you know you’ll never be forced out. As long as you have a fixed rate mortgage, you know, with certainty, what next year’s office space costs will be. You’ll never find yourself in the uncomfortable situation of having your rent arbitrarily hiked up. No, you’ll have what every business craves more of: stability and certainty. More importantly, you’ll have a home, a physical location that’s truly yours.
The aforementioned pros of owning your own office space are great, but when it comes down to it, the decision to buy is largely a financial one. For many businesses, owning is simply cheaper than renting, but there’s more to it than that. Buying real estate is an investment, and if you invest in the right location, you could see it appreciate very well over time. In fact, many companies who aren’t known as real estate giants have actually made quite a bit of money with shrewd property investment strategies.
Buying vs. Renting Office Space
It might surprise some to learn that McDonald’s is one such company. Sure, they make a killing every year in sales, but a large chunk of their revenue comes as a direct result of their real estate empire. Ever since they made the decision to jump into the real estate market in 1956, they’ve slowly added more and more choice locations to their ever-expanding portfolio. Your business likely won’t ever own as much property as McDonald’s, but their success in employing this strategy of purchasing their business space is a great example of what great results it can produce for a company.
The Reality of Realty
The truth is that every successful business needs some degree of owning and renting throughout their lifetime. In McDonald’s early days, they weren’t buying up choice real estate left and right. Everything must start small, including businesses. A fledgling company won’t be able to afford anything more expense than a rented office space, and at that point in their life span, they shouldn’t want to do otherwise. What if their company suddenly rockets off and they’re left owning a tiny office space that can no longer house them comfortably?
On the opposite side of the spectrum, an unexpected tightening of finances could result in downsizing, which can be rather complicated if you’re tethered to an office oversized for your needs. Renting gives a young company the flexibility needed to adjust when the whims of chance come knocking, and in those early days, there will be a lot of changes that must be made.
But once your business starts to thrive and blossom, renting no longer becomes the optimal choice. As things stabilize, owning the property you call home begins to look much more enticing. In fact, once you know your company will be around for the long haul, owning your office space emerges as a simple accountant’s decision. As you take a look at mortgage rates in Canada and crunch the numbers, you’ll realize that, if you know you’re going to occupy a space for decades to come, it’s cheaper to own it. And having the added assurance that you’ll never be kicked out by your landlord is a nice bonus.
As a business owner, there will come a time when you need to rent and another time where you might want to buy up property. For all things, there is a season, and realty is no exception. As your company matures, you should take a look at the big picture and evaluate the decision in those terms. You’ll find the point of growth where renting is no longer the more affordable option. Then you can finally drop the lease agreements and grow your business in a new direction. You can plant your roots in a place that you’re proud to call home.
(Written and published by Georgia Webster, October 2013 on Soho.com)