Business Property: Owning vs Leasing

If you have the kind of business that needs a facility and/or offices (most do), then you are likely faced with the decision of leasing or owning space.

I am an advocate of owning space.  However, there are exceptions, such as

1.  You are new in business and aren't sure how you will grow.  
2.  You are in a spot where the strain to purchase would be too much, and would take significant attention away from your business.
3.  Your need for space is changing or is nomadic.  

All of these are legitimate reasons to lease.  All three of these applied to my business in the very early years, and they probably apply to most folks at the very beginning.

Now, the reasons to own:

1.  More steady and predictable costs.  Once you own a building, your note payment is more stable than rent costs.  It isn't perfectly stable.  You'll have maintenance, taxes and insurance.  Those will likely go up, but my experience is that rents tend to fluctuate more and occasionally offer a very negative surprise.

2.  With a building you own, you can make improvements as you see fit.  You don’t have to worry about whether a landlord will approve something.  This lets you think creatively about how best to utilize the building.

3.  This is the big one.  To own your building is a practical, yet very strong diversification of your wealth.  Something bad may happen to your business, yet you will still own a valuable piece of real estate.  

Number 3 has made an impression on me from my earliest days of listening to my parents discuss their business.  They owned a small moving and storage company and bought a building when I was a very young kid.  

Decades later, when they decided to retire, I remember my folks saying how the building was worth as much as the business.  I've also heard the same song from a friend of mine who was a financial planner, who bought his building.  

On the other hand, I've heard regrets from business owners who have leased for very long periods, and they regret not having anything to show for all those years of paying rent.

Bottom Line:  I encourage you to lean toward ownership when the opportunity presents itself.  You will need to buy the right building at a fair price, so be patient.  In time, I believe it will be the best move for you.