Regardless of where a business is in its growth life, expansion has to be a question that should garner a great deal of consideration. Essentially, the location of a new storefront could have a huge impact on the business. Part of the decision in where to expand depends on whether the business will rent space or purchase a building.
This post highlights several factors businesses should consider when deciding whether to rent or buy commercial real estate.
How will cash flow be affected – Of course, commercial leases involve a much smaller financial commitment. A security deposit and month’s rent is usually enough to get started. Conversely, buying a building may involve much more than this, for the buyer may be responsible for paying closing costs. Nevertheless, monthly rent payments may be higher than loan payments.
Real estate values – As the old adage goes, location is everything. You may want to choose an area where there is potential growth if you are buying property. If you have your eyes set on a high value district, perhaps renting may be best for you.
Tax savings – Indeed, monthly rental payments are deductible as business expenses. Also, a business can depreciate the property it owns each year for some tax savings. Essentially the analysis must be completed to determine what is in the business’ interests in the long term as well as the short term.
If you have additional questions regarding the purchase or lease of commercial real estate in New York City, an experienced attorney can help.