Taking that step towards a larger space comes with a core decision to be made: own or rent. Both have their advantages and disadvantages, but ownership can have more drawbacks than renting.
When you make the decision to buy, you are adding a long-term fixed cost to your books. Not only is it a fixed cost, it is one that has to be at the top of the list for repayment. A mortgage on a commercial property is the same as a personal home. It has to be paid or risk going into foreclosure. Even though your corporation can shield you from personal liability, you are still exposed if you used personal assets to guarantee the loan.
On top of the mortgage are the property taxes and maintenance costs. The taxing body wants its taxes paid, and a leaky roof can't be ignored. These and other aspects of ownership have the potential to severely eat into profit margins that could otherwise go back into building the business.
In the event that the business falters or fails, something no one wants to see happen, the building has to be disposed of. It can be months before a property is sold, adding another burden on top of winding down the business.
Renting Offers Flexibility For Your Business
Rent has to be paid, just as with a mortgage, but if your business income takes a hit and you need to downsize, you don't have to dispose of a building. Instead, you negotiate an exit strategy with your landlord and simply walk away on the last day. Building maintenance can be included with a net lease, although it is your responsibility in a gross lease. The tradeoff here is that you are not responsible for the property taxes, an instant cost savings.
There is much more freedom for a business when renting space, especially if the future has any whiff of uncertainty. Overall costs are generally lower, and there are more options with which to make big decisions.
Such flexibility is available at Hub83, where we offer rental space for business owners who need office space to work from. We have a variety of options that range from the occasional use of shared desk space to a monthly rental for a private desk and locked storage space. Don't need a desk space but want a business address and receptionist? We offer a virtual mailbox with the use of our South Barrington address along with a phone answering service. You get all the advantages of renting in a state-of-the-art office suite without the extra overhead.
Do you rent or own your office space? Tell us what your thoughts are.