Buying brings stability while leases offer flexibility - bizjournals:

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Buying a property represents amuch longer-terj financial commitment than leasing and, as requires a realistic assessment by the potential purchaser of the company’xs future prospects. Companies anticipating significant growth must decide whethet to purchase property large enough to accommodate that growth over If the space is initiallytoo large, they might want to lease the excesws space to a tenant for now. The potential rentalk income that leasing surplu s space might generate for the purchaseer also should be part ofthe equation.
Spacd is much less of an issue when leasinvan office, since if it becomes too smalk — or too large — the company has the option of not renewinh its lease and moving elsewhere. That flexibility also can be usefu l if market changes over time indicatr that a move to a different location woulxbe advantageous. On the other hand, renters can be facedr with unwelcome disruption should the landlord decide to terminatwethe lease. Deciding to purchase also commits business owners to a much larget upfront cash outlay than theleasing option.
The initialp outlay when purchasing will include not only a substantia ldown payment, but also the cost of inspectionzs and appraisals, loan-related fees and other closing The upside is that, in contrast with a firm that leases the purchaser will, in time, own an asset that can be sold hopefully at a profit. According to online office spacre referral and information networkOfficeFinder LLC, businessx owners purchasing office space can expect to make a down payment of between 10 percent and 25 percent of the purchase price. By comparison, the upfronft cost involved in leasing a space usuallyh is limited to just a coupleof rent.
Potential buyers should also consider the effec t of the down payment on workinyg capital available to financethe company’w growth. Other issues include taxes, maintenance costa and potential interest and rentalrate Renters, for example, usually don’t have to worry about regular maintenance costs, as thes e normally are the responsibility of the property However, should they wish to make significant alterationsx to the leased space, they can do so only with the landlord’d consent. Property owners, on the other are free to make whatever changesthey wish.
Purchaserzs also have the advantage of knowing in advances what their future monthly loan paymentswill be, especially when they have negotiatee a fixed-rate loan. Tenants, on the other hand, are likeluy to face regular increases in rentall rates and need tobudget accordingly. Leasing initially may look like thecheapeer option, says Tim Hatlestad, president of the Certifiede Commercial Investment Member Institute, but to help reach a decision, busineszs owners should carry out an after-tax analysis to determinde what can be written off, as renting and buying offer different “If everything else were equal, then you have to look at the optionsz after taxes,” Hatlestad says.
“The after-tax analysis, through a number of measures, will tell you what costs less.” Property owners, for example, are eligible for deductions ofproperthy taxes, mortgage interest and depreciatioj among other things, while thos e who lease office space usually can deduct the full amountr of the rent as a business Jim Osgood, CEO of OfficeFinder, says the stagse a business is at in its life cycle can be an important factor in determining whether to buy or lease. A more established business shouldf consider buyingoffice space, he since anticipated growth is easier to predictf accurately.
A startup, on the other hand, woulrd probably be better to leaseran office, as it would provide greater flexibility and fewe constraints to growth.