Renting Versus Buying Your Commercial Space

Becoming an entrepreneur is almost as much of a part of the American dream as a white picket fence. However, with increased success in your business comes increased expenses – especially when it comes to your office space. After so many years working in architecture and with optometric spaces, it has become obvious to us that there are many ups and downs you may run into while finding your ideal workspace. In fact, to help you decide, Optometric Architects have come up with a list of pros and cons when it comes to renting versus buying your commercial optometry space. 

Renting Pros

• Lower upfront cost – When you’re not having to make a down payment on the property, you’re saving yourself some money right from the start. Not only does this give you more liquidity to invest in your business, but it allows you to delegate funds to other areas that may have been ignored otherwise.
• Tax breaks – One big advantage to leasing your space is being able to deduct your lease payment. You may also be able to deduct other costs associated with renting like property insurance, maintenance costs and some utilities.
• Your costs are fixed – Generally, when leasing, your costs month to month stay consistent. There typically aren’t increases associated with maintenance or repairs as those are the responsibility of the landlord. This gives you room in your budget to optimize your space to fit your preferences.

Renting Cons

• No equity – With all pros come cons and this is one of those times. Although you do not have to have a down payment to lease, you also don’t build equity as you make your monthly payments. This means you are not gaining anything from the appreciation of the property.
• No passive income – If you don’t own the space, you can’t use the property to generate passive income from tenants. Instead of money going into your pocket, your money is going into your landlord’s.
• Limited control of the space – Most leases are ironclad. This means that anything to do with the property – from aesthetics to rent hikes – is out of your control.

Buying Pros

• Equity in the property – Whether you paid in cash or you’re making monthly payments, you’re building equity in the property. This is especially helpful if you plan on eventually refinancing or selling. Equity is simply money in your pocket. The more you invest in your property, the more money you stand to make. Simple design updates are an easy way to increase your equity.
• Tax breaks - There are certain tax breaks for business owners that can be extremely helpful. If you decide to buy your commercial property, you are able to deduct the interest and depreciation on your property as a tax break each year.
• Potential for rental income – As we mentioned earlier, it is advantageous to occupy at least 51% of a commercial property. If this means you have leftover commercial space available, you can rent it out to tenants and create additional means of passive income.

Buying Cons

• Upfront down payment – Depending on your lender, you may need to have a down payment of anywhere from 10 to 20% of the value of the property. Not only is it a large upfront cost, but it also depletes some of the liquid capital you had on hand for other ventures.
• Financing can be difficult – Not only are commercial real estate loans hard to qualify for but finding a property can be even harder.
• Liability comes with the building – Now that you own the property, you are responsible for the wellbeing of the people on it. This will require liability insurance that covers you from lawsuits should anything happen. There are also additional insurance policies needed if you decide to rent a portion of the property or have tenants.

All of this being said, there is beauty in both options because whatever you choose will be what’s best for you, your business and your patients. And no matter which option works best, Optometric Architects have the knowledge to transform your space. With an emphasis on aesthetics and design, we can create a functional office where the safety and satisfaction of your clients is at the forefront. For more info on the design options we offer, visit our site or reach out to a member of our team today.