Setting up a business is not an easy task. You need to work upon many aspects of it and to start with the most important work is to search for the right office space. However, whether to buy or rent it is one of the biggest dilemmas which most of the entrepreneurs face. Now, here many factors govern the decision like your budget, the location, type of property, expansion plans, etc.
While leasing and office space have its benefits for startups and budding entrepreneurs, an established business person can easily spend a hefty amount in buying a modern office space at a premium location. Take a look at several other factors, benefits, and challenges of both buying and leasing that will help you in choosing the perfect one:
Buying Office Space-Benefits
- Buying an office space means you are building an asset for a lifetime that can be used wisely in future to earn income. The property can also serve as collateral for loans.
- While purchasing a property via loan, you can also avail various tax deductions on EMIs paid every month. This will help in saving ample amount as commercial property costs much.
- A fully-owned commercial property can also be used for leasing it for other businesses. The rent availed from the property will not only help you in earning extra income but can help you in availing tax deduction from the rent received.
- Buying an office space means, you have all the power to design it accordingly as per your business model.
Buying Office Space-Challenges
- Buying office space is not easy for all the entrepreneurs especially for budding start-ups. They don’t have much investment during the initial stages.
- There may be times when you want to explore different cities to expand your business. So, if you invest in a commercial property, then you may have to stick to a particular location as you cannot afford to buy a space every time. Here, leasing comes to rescue.
- Lastly, buying an office space means any destruction, repair, and renovation cost have to bear by the company only. The builder is not responsible for it any point of time after selling the property.
Leasing Office Space- Benefits
- The biggest advantage of leasing an office space is that you don’t have to spend much in the start. In case you are a start-up and don’t have much investment potential, then you can easily lease out a small space.
- Secondly, you have the flexibility to choose the location of the property as per convenience. For instance, you can lease a coworking space at a premium location which will cost you much less as compared to buying it.
- These days, various trending office space rentals have emerged in the Indian commercial market that is attracting even high-profile business persons. Coworking spaces, shared spaces, open office spaces are just a few examples to it. Leasing these spaces is much cost-effective.
- When you lease an office space, you have to pay a limited security amount (3-6 months) which is much less than the down payment. With a new draft tenancy act already proposed, this security amount will further reduce to just 2 months.
- Any repair or renovation costs have to be bear up by the landlord of the commercial property. You don’t have to pay any money from your pocket.
Leasing Office Space- Challenges
- Leasing an office space means you have to pay high brokerage fees to the real estate agent that again is not cost-effective.
- While renting an office space, the rent is subjected to change after every year or two based on the rent agreement. It could be an added burden for a start-up.
Both buying and renting office space has its pros and cons depending upon the business. So, read the above points carefully and decide accordingly.