Lease Or Buy a Retail Location
01/25/12
Ever wonder why large corporations prefer to lease a property rather than buying it?
Although owning a real estate for your retail business may be tempting but its burden may be too much and even hamper the core business. Although there are a hand full of examples of business owners whose property was bought out at a much higher profit, but more cases of businesses who faced the difficulty of owning a property exists.
Leasing a property most certainly has a number of advantages over owning one. To start with it offers you the flexibility to expand or contract your retail business. You can renegotiate your lease terms if the situation arises. However, owning your property would burden you to sell it out in a soft market when in fact this extra effort could actually help your core business.
Trading in property to a greater extent depends on market timing. If your timing isn't right you are more likely to buy when the market is rising and sell when the market has actually fallen. This is mostly the case, hence professionals are better off with real estate then we novices are.
As a retail business owner you are more likely to concentrate on the needs of your retail business rather than the real estate market trend. If your retail business needs to expand and require bigger facilities you will need to provide it whether the real estate market is high or low. Quite often one of the two suffers.
Owning your own facility also comes with the added responsibility of maintaining it. It requires considerable amount of time and dedication and is better left to professionals.
If you need to sell off your retail business then you will find it much more difficult to sell it along with the establishment. Often the added price of the real estate may hamper you from selling off your retail business when the need arises.
When in business the more capital you have at hand, the better off you are. However, if you invest a considerable amount of your capital on owning a real estate you will have less to spend on your core business hampering its growth potential.
If you own the property you are likely to be able to write off only the interest expenses on a mortgage. However, if the property is availed on lease the payments are completely deductible. On the other hand if you sell off your retail store(s) along with the property you are looking at a good chunk of taxable payment from selling a depreciated building.
Most importantly you need to put all your time and efforts in making your retail business grow rather than having to look into the day-to-day maintenance of the property.