Buying vs. Leasing Commercial Real Estate in Tampa
Want to start your own company in Tampa? Or maybe you want a new office space? Wherever the case, it’s not difficult to find the ideal commercial property that fits all your needs. But that’s when the question comes in; should you buy or lease your commercial real estate? The answer is not as straightforward as you might’ve hoped. To make the right choice, you need to examine all the upsides and downsides of both options. That’s why, to help you out, we dedicated this article to comparing buying vs. leasing commercial real estate in Tampa.
Buying Commercial Real Estate in Tampa
Whether you pay cash up front or use a commercial real estate loan to fund the acquisition, buying commercial real estate entitles you to the whole asset ownership. However, just like everything else in life, you need to consider some pros and cons before making this choice.
Pros of Buying Commercial Real Estate
Earning Equity – When you buy a property, there are a few different ways it might generate equity for you. If you borrow money to buy it, as you pay it back, the property will increase in value. The property’s worth will rise if you make improvements like repairs or additions, further increasing the equity. However, when you lease a property, all these advantages go to the landlord rather than to you.
Tax Deductibles – One big pro of buying vs. leasing commercial real estate in Tampa is the tax benefits. You can write off expenses for interest, depreciation, and non-mortgage-related costs on your taxes.
Renting the Space – While most firms that buy commercial real estate utilize at least half of the building, the remaining space can be rented out. This will provide rental money, but it also means that you, as the landlord, will be accountable to the tenants that rent the space. Moreover, in case you ever decide to sell your business, you can continue to rent the space and turn a profit.
Cons of Buying Commercial Real Estate
Added Responsibility – You are in charge of ensuring that everyone within the building is safe and healthy because you are the owner. You’ll also be responsible for the building’s upkeep and repairs. You will be responsible for repairs if you rent out other areas of the building, necessitating the purchase of additional insurance policies.
More Expenses Up Front – One of the biggest cons of buying is the expenses you’ll have to pay upfront. When buying real estate instead of leasing, you’ll probably pay up to six times as much money upfront owing to down payments, fees, and closing charges. This requires your business to have available liquid funds to make the transaction.
Depreciation Risk – Building owners have gained more equity and value due to the rise in commercial real estate values, but this rise may not last. Many analysts predict a real estate market correction in the coming months, resulting in your property losing value solely because of market circumstances. However, even with this in mind, some still believe renting out small office spaces can pay off in the long run and is one of the best commercial investments you can make.
No Flexibility – A major benefit of a lease is the option to relocate to a property that better suits your company’s needs once the term has ended without renewing it. However, when you own the land, it can be challenging to sell and move into a new facility, whether your firm is expanding or contracting. For example, if you buy a new business but can’t fit it in the same building, you’ll probably have to get more space rather than move your business.
Leasing Commercial Real Estate in Tampa
Depending on your company’s needs, you could find it more advantageous to lease commercial real estate rather than buy it. When renting out commercial real estate, there are several factors to consider. Below are some of the benefits and drawbacks of leasing commercial real estate.
Pros Of Leasing Commercial Real Estate
Location – A company must be in a top location to prosper. Tampa is a great site to launch a company. Its inhabitants and visitors always search for activities, stores, and restaurants. However, your financial situation may hinder your ability to start a business here. To launch your business in Tampa, you do not need to own real estate for commercial use. You can rent it.
Expenses – It is less expensive to lease a business property than to own a structure or storefront. More business properties are frequently available for rent in the region.
Flexibility in Decision Making – When you lease a commercial property, you won’t have to worry about transferring your business to a new site or selling your facility as it expands. According to the lease agreement, you are not tied to that particular site for the duration of your business operation.
If you ever decide to move your business to the other side of Tampa, you’ll be able to do it with no issues. It will be as easy as moving to another part of the city yourself just because it’s got lower rent. Of course, when it comes to the physical act of moving, you should consider getting movers to help you relocate. A simple transfer within the city is possible if you research and find reputable movers.
Cons Of Leasing Commercial Real Estate
Costs May Increase Upon Renewal of Lease. – The end of the lease period is when there is the most uncertainty. A new lease’s monthly payment may be dramatically increased by the landlord, which you might not be able to afford. Additionally, they can decide not to renew the lease, leaving you rushing to find a new place.
Increased Monthly Payments – Your monthly lease payment may be larger than a mortgage payment since a commercial real estate mortgage can be spread out over 30 years. Tenants may be required to pay monthly property taxes, insurance, utilities, and maintenance fees under some lease terms, such as a triple net lease. These further raise the price of a lease in comparison to a mortgage for a buy.
Deciding between buying vs. leasing commercial real estate in Tampa is not easy. To make the final decision, you must examine your short-term and long-term goals and see what best fits into your business plan.
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