Buying New Office Space

Buying new office space can be a huge step toward growing your business. As your productivity increases, you may find yourself outgrowing your current arrangement. A cramped office space can stifle your company's potential, so it is in your best interest to start exploring new workplace options. The first decision you make after resolving to find new office space is whether to lease or buy. Each route has its pros and cons, so find the option that suits your business best.

Depending on where you are located, it could be a prime buyer's market in your area. Much like the housing market, businesses have been forced to downsize or even dissolve in recent years, leaving their space vacant. New developments that cropped up just before the recession have sat dormant for several years. Property owners in many cities are desperate for occupants, so the prices are right. Buying real estate now is a golden opportunity, but only if you actually have the capital to do so.

Buying Versus Leasing

Buying has its advantages. Investing in real estate now while it is inexpensive means it could appreciate over time, giving you the opportunity to one day sell and make a substantial profit. If you find a really great deal on a large parcel, you could turn around and lease the additional office space for a new source of revenue. With a fixed rate mortgage, you can anticipate your expenses for the coming years as opposed to leases with accelerator clauses that increase over time. Finally, your business can benefit from property tax deductions when you own office space.

There are also plenty of pitfalls when it comes to buying office space. You first need the capital to make a substantial downpayment, sometimes 25 or 30 percent. You also have to factor in the mortgage payment to your business operations. Additional costs include inspections, maintenance, property tax and any improvement costs associated with making the space livable and facilitating appreciation. Your business may also be stunted if you are tied down to a building you own, since outgrowing the space leads to the hassle of trying to sell.

Of course, the benefits of leasing are the inverse of buying's drawbacks and vice versa. Leasing does not require a large downpayment, and rent can be quite reasonable. On the other hand, rent can be exorbitant in many places, and you are no closer to owning the property after years of payments when you lease. A good arrangement with the property owner means you never have to worry about maintenance and repairs. You can also allow your business to continue growing freely without worrying about having to sell.

Preparing to Buy

If you decide to buy new office space, there are some precautions to observe. When you're eying a property, have an inspector check it out before you commit. If you get stuck with a dump, your opportunity cost will increase drastically. You might also speak with an appraiser about future-price appreciation estimates and what you can do to ensure a future profit.

If you decide to become a landlord, buying a large parcel to lease, talk to a tax professional and an attorney about placing the office space in a limited liability company. The financial and legal implications could be beneficial to you and your growing business. This option isn't for everyone, but the tax benefits and legal protections are appealing to many business owners. Carefully consider all of the benefits and drawbacks to buying new office space. Saving the necessary capital, getting a good mortgage rate and considering your growth potential can help you in making a purchase.

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