Coldwell Banker River Valley Commercial Division

Minding Business

Looking for commercial property? Consider how much it costs not to buy


Posted: October 04, 2018 by Anna Jotham

When it’s time to consider your options for securing commercial property, it’s important to consider the hidden costs that come with not buying. Sure, leasing may seem to save you money, and you won’t need a down payment, but you may be surprised by how much you stand to lose out on.

 

The hidden costs of not buying commercial property

Commercial real estate is complex business, and there’s much to consider, so let’s boil it down in terms of what you’ll miss out on when you don’t buy.

 

You won’t build equity

When you purchase commercial property, one of the major advantages is that over time you’ll build some serious equity. That’s as good as money in the bank, but it’s so much more. Consider that when it’s time to grow your organization, you’ll have equity to leverage as collateral. More, think about the value of cashing in that equity to finance your golden years.

 

You can’t enjoy an appreciating asset

When you own commercial real estate, you have the potential to experience appreciation of your property value over time. That may factor in an interest rate, the inflation rate, supply and demand and other factors.

 

Your costs may increase over time

When you take out a fixed loan to finance a commercial real estate purchase, you can be confident that your payments won’t increase over the loan repayment cycle. That’s not so when you lease. When you don’t buy commercial real estate, you’ll likely face increases in your monthly payment over time.

 

You can’t deduct interest payments

When you buy commercial property, you are allowed to deduct the interest you are paying on your loan from your tax obligation.

 

You can’t lease out your extra space

When you own a property, that space is yours. Don’t need it all? You can generate extra income from leasing out that space to other businesses. If you don’t buy, your access to that extra income is subject to the landlord’s or building owner’s approval. That potential rental income can be a substantial loss.

 

You don’t have control over the commercial property

Let’s face it, there’s a hidden cost that comes with giving up control of your space. You want to remodel? You’ll have to talk to the landlord first. Ready to expand? Not so fast. But when you own, you’re bound by zoning restrictions and local laws, but the space is otherwise yours to do with as you please.

 

You can’t depreciate your property

The IRS allows commercial property owners to write off the depreciation of owned property. If you don’t own the property, you can’t write that off.

 

Considering buying commercial real estate? We’re here for you

When it’s time to get off the leasing treadmill or if you’re simply ready to jump in to commercial real estate ownership, we’re here to help. Contact our commercial real estate experts to get on the fast track to realizing the potential that comes with ownership.

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