Should you buy, lease or sublease office space?
When planning for a venue to do business, should you buy, lease, or sub-lease office space? What are the advantages and disadvantages of each? You will no doubt start looking for properties that are for lease, for rent, or for sale and will try to find the space in locations that are not only good for business but good for your employees too.
Before making a decision on what to do in regards to business office space for sale or for lease, you should have your real estate broker do an analysis of whether it is more advantageous to buy or lease and you should also research the tax advantages of leasing over buying.
First of all, when you lease office space, what you pay for leasing is fully tax-deductible because it is a business expense. When you are first starting out in business, you need all the tax breaks you can get and you will find a deduction like this to be most beneficial indeed.
When you buy property for sale for office space, you may have the joy of ownership but you certainly will not have the joy of maintenance, especially if it is an older building. When leasing the building maintenance costs usually come as part of the services of the office space for lease or for rent. This means that you do not have to worry about a light bulb that is out, a leaky faucet in the washroom, or having the space cleaned each night. These services are part of the package. Of course if you buy the office space and spend money on a cleaning service then the service is tax deductible as well.
One point where it is probably more advantageous to buy the office space is if you are going to need to make a lot of custom modifications to the interior. Letâ€™s say you are a doctor and want to open up your own clinic. In this case, you will more than likely have to make modifications on the inside for all of the medical equipment required to operate a small clinic. Essentially, you are making improvements to the property and you would want to protect your investment by buying instead of renting or leasing. Also, when you buy, you will not have to deal with rent increases that are common as prices increase over time.
When you buy office space, you might even be able to start an ancillary business by sub-leasing extra office space if you buy a large enough building. However, you might damage your image somewhat because sub-leasing is typically used by businesses not doing too good financially. Another reason to sub-lease is when a business needs to get out of the business lease for one reason or another but the landlord will not release the primary tenant from the lease. Many times the primary lessee will want to move the business elsewhere so it advantageous to sub-lease. This way the landlord gets his rent, the primary lessee gets to move on, and the sub-lessee gets some office space.
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