Buying or Renting a Commercial Space: The Advantages and Disadvantages

Buying or Renting a Commercial Space: The Advantages and Disadvantages

As a business owner, you obviously want what is best for your business. Deciding on whether you should buy or rent the physical location from which your customers will be able to purchase your products or services is no easy matter.

 

There are certain factors that must be taken into account to make an informed decision. Here are some tips to help guide you. 

Renting: The Pros

If you’re just starting out and your company isn’t yet generating much revenue, you may not have the necessary capital to finance the purchase of a commercial space and take the next step in growing your business. Then rent, especially if you’re not sure how things will pan out. Paying a monthly rent is a far less onerous financial responsibility than reimbursing a loan. Those first few years are usually a roller-coaster ride and you may have to adapt quickly to changing circumstances. Being a tenant—depending on the lease’s terms and conditions—allows you this flexibility all while avoiding the duties and issues that can come with owning a property.

Renting: The Cons

In spite of this, buying a space or building in which to carry out your operations can be advantageous even for a young business as it does offer more freedom. Indeed, renting has several limitations that might make you hesitant to choose this option. For example, your landlord has the right not to renew your lease or to increase the rent, forcing you to relocate on short notice and absorb the associated costs. Not to mention the loss in revenue incurred during a temporary closure while you move.


Furthermore, the lease agreement may contain certain restrictions precluding you from expanding your operations or modifying the space, like installing equipment and accessories. As a tenant, you will also have to pay some joint expenses, such as those related to maintaining common areas (cleaning, snow removal, landscaping).

 Buying: The Pros

Are you lucky enough to be the owner of a thriving business and have the perfect storefront location in your sights? Then buying is the sensible option it if you believe that it will grow your sales thanks to it easy street access and proximity to your main suppliers (thereby reducing your shipping expenses). Plus, by investing in commercial real estate—generally considered low risk—you will be simultaneously increasing your personal wealth. Owning your base of operations means that you are the only person in charge and can do with the space what you will. This purchase can also decrease your monthly occupancy fees. 

Buying: The Cons

However, owning a commercial space does come with some drawbacks. Interest rates can rise at any time and significantly increase your monthly mortgage payments. Issues related to the building, like a latent defect or environmental contamination, or an unexpected drop in sales could erode your assets. It is therefore recommended that you do your research—with the support of an expert in the field—before proceeding with such a major purchase.

In either case, an entrepreneur can never go wrong by teaming up with a real estate broker. To come to the best decision possible, you can rely on the expertise of a RE/MAX real estate broker specializing in the sale or rental of commercial spaces or buildings. Set up a meeting with one today. They will guide you through the entire process, from finding the right property, negotiating terms, and signing the contract. You can rest easy with a RE/MAX broker on your side. 

RE/MAX Québec

By RE/MAX Québec

By RE/MAX Québec

A leader in the real estate industry since 1982, the RE/MAX network brings together the most efficient brokers.