Rent or Own – What’s Right For You?

PROS FOR OWNING

CONS FOR OWNING

BUILD EQUITY

Owning your own building brings along some fantastic advantages, one of which is the opportunity to build equity in your real estate. This equity can be a game-changer for your business, allowing you to expand in the future or provide financial security. As you gradually reduce the mortgage balance, you’re not only investing in a property but also building a valuable asset.

REQUIRES MORE CASH UPFRONT

When it comes to deciding between a commercial lease and purchasing a building, considering the initial cash expenses is important. With a lease, you typically need to cover a security deposit and the first month’s rent, keeping the upfront costs relatively low. On the other hand, buying a property requires upfront cash for the down payment and closing costs. But here’s the good news, with a 504 loan, you enjoy a lower down payment, usually around 10%, and even have the option to finance closing costs and fees. This makes buying a property more feasible and accessible for business owners like you. So, don’t worry, there are options available to make your dream of owning a building more achievable!

CONTROL FIXED COSTS

With a fixed-rate 504 loan, you have the peace of mind of knowing exactly what you’ll be paying each month. Additionally, when seeking Bank/Lender financing, you have the opportunity to negotiate terms, whether it’s a fixed or variable rate, with at least a 10-year term. This stability in knowing your monthly expenses can be incredibly valuable, as it eliminates the worry of a landlord increasing your rent once the lease is up. By owning your building, you gain greater control over your financial situation, allowing you to plan and budget more effectively for the future.

LONG TERM COMMITMENT

A 20 or 25-year 504 loan typically involves a longer-term commitment than a commercial lease. When you sign a lease agreement, you typically agree to a fixed duration, often ranging from a few years to a decade. However, with a 504 loan, you’re embarking on a more extended journey of financial commitment. But remember, this longer-term loan allows you to spread payments out over 20 to 25 years, providing you with greater stability and predictability in terms of your monthly financial obligations. It’s like planting a seed for your future success, as you invest in a property and gradually pay off the loan over time.

TAX BENEFITS

There can be some great tax benefits to owning a building. One of the most exciting advantages is the ability to deduct mortgage interest and property taxes from your taxable income. These deductions can help lower your overall tax liability and put more money back into your pocket. Additionally, when you own a property, you can also take advantage of depreciation deductions on the property and any improvements you make over time. This means more potential savings for you in the long run. So, by owning your own building, you not only have a place for your business but also get to enjoy these tax perks that can contribute to your financial well-being.

TIMING

Applying for a loan is more complex than getting a commercial property lease. While getting a lease often involves simpler steps like providing basic information and negotiating terms, applying for a loan requires a more comprehensive approach. You’ll need to provide detailed financial information, such as your business plans, and financial statements. This process may require more paperwork and take a bit longer than securing a lease.