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Helping You Navigate Complex Legal Issues

When should I lease my place of business instead of buying?

Gregory A. Lang

Minneapolis business owners will have a lot to consider when trying to decide whether to buy or lease their place of business. Ultimately, it all comes down to what will save them the most money, and make them the most profit in the long run, right?

In this article, let's take a look at some of the most important factors that favor the leasing of your facility:

-- Cash flow: By leasing a facility you can save on cash flow. With a lease, the up front costs of having a place of business will merely be the security deposit and first month's rent. This is significantly less than needing to put forward a large downpayment on an expensive piece of real estate.

-- Credit rating: If your company has yet to establish a strong credit rating, you might not be able to qualify for a favorable deal on a mortgage.

-- Maintenance: A benefit of leasing is not needing to worry about maintaining your property. Your landlord will largely be responsible to make repairs.

-- Real estate values: If the real estate market is at it's peak, or particularly high, it may be advantageous to wait before purchasing your business location.

-- Mobility: If you're concerned that your business may grow or have other requirements in the years to come, it's wise to wait before buying a permanent space.

-- Tax savings: Businesses can deduct their rent as a business expense, making renting -- in some cases -- much more favorable than buying.

If you have questions about leasing or buying a property from a legal perspective, a Minnesota real estate lawyer can let you know what the advantages are from this perspective. It's always best for business owners to analyze the decision to lease or buy from every conceivable angle.

Source: FindLaw, "Factors to Consider: Lease or Purchase of a Facility," accessed Feb. 10, 2017

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