As your business starts to bloom, you might need a bigger office space. Now the question is, whether to buy or rent that space for your startup? That’s a question all entrepreneurs ask themselves while paving the way for their businesses to grow stronger.
Before you sign a lease or look at purchasing an office space for your startup, take some time to carefully assess the pros and cons of all the important factors. Read our top reasons to help you choose between renting or buying an office space for your startup.
Down Payments vs Monthly Rental
Buying a commercial property is a long-term commitment and needs far more upfront cost. Along with a hefty down payment, purchasing a property involves improvement and maintenance costs, insurance, taxes and more. Whether it’s a fused light bulb or any wiring that needs repair, you will be responsible for all maintenance issues if you own your office space. Therefore, buying an office space is best suited for businesses with adequate financial resources. On the other hand, leasing is a short-term commitment. By not tying up your money in real estate, you can explore a wide range of opportunities in the market. You pay a refundable deposit at the beginning of the lease term and your cash flow becomes working capital.
Flexibility vs Equity
Leasing offers you the flexibility to move in and out of the office space with ease, in case it doesn’t suit your needs. You have the freedom to give notice to the landlord and expand quickly to a different commercial property. Also, a startup may experience unforeseen investments in the future. If your business continues to grow, you may need a new space earlier than expected, forcing the sale of the current property. Purchased property isn’t nearly as flexible but it provides you with the opportunity to build equity that can be used to lay the foundation for future expansion.
Tax Deductions
From a financial viewpoint, if you pay rent to use any commercial property or office space for your startup, you can generally deduct your outlays. So, it makes more sense to rent than to buy an office space. In case of leasing an office space, your rental amount is 100% tax-deductible as a business expense, and you don’t need to get into complicated calculus of property and interest tax. Whereas, in case you buy an office space, only property tax and interest tax are deductible as an expense, so you end up getting into the hassle of paying hefty tax amounts to authorities.
For an entrepreneur, choosing between renting or buying an office space can be a difficult task. But with thorough research of your market and finances, you can make the right move for your startup. Your decision would be dependent on a combination of numerous factors like finance, tax and personal issues.
Before finalizing your office space, don’t miss out on exploring a stunning commercial property for rent offered by Max House, Okhla in the heart of New Delhi. Located in the epicentre of the Secondary Business District, Max House offers prime real estate spread across 10 floors and is poised to be the new business address in Delhi NCR. Max House blends thoughtful design and superior hospitality to nurture a more productive, healthier and happier community.
