Lease Versus Buying
I am not sure if this is the right forum that I should be posting in. I am opening up a business. It is located in an office complex just being built. They are office condos. I have a chance to buy the office condo. Should i lease it or buy it. It will be cheaper for me to buy the condo. Am I better off leasing the space in case the business doesnt work out or is it better to buy because then I will own it. Is commercial property harder to sell? Thanks, Mike
The question you ask. Is it a good buy? Is the building in a good area and is it attractive and modern and slightly better then the run of office building. If you think it is a goody and you can buy it under market and if the nice seller will carry a little paper. Then go for it.
Cheers Lucius
There are professionals who can help you determine if the condo is a good buy. It may "seem" cheaper than leasing, but there are greater benefits to owning, and the potential for greater expenses when looking at a monthly outlay. You have first, the association fee, which may or may not be accounted for in a lease.
You have the benefit of a business asset when you purchase, and the establishment of a credit relationship in the name of your new company.
You may benefit in other ways as well, but the most important factor is whether or not purchasing represents a good real estate deal in its own right.
A professional commercial real estate appraiser will be able to assist you in determining whether the condo is a good buy. He/she will analyze the property's market and reason intelligently on the potential for appreciation and resale value down the road.
He/she can certainly tell you if the association fees are within reason (and the rental rates, even those you could expect to ask if you should have to move your business out but wish to retain the property).
On your own, you can ask for pre-construction discounts, warranties, find out the time frame for 100% sell out of all units, find out what other developments (new or existing) are in the area and at what vacancy, and check with officials to see whether purchases of land to build such developments has occurred of late, and whether permits have been pulled for like projects. It would be a bummer to buy a property that may actually depreciate due to a saturated market.
In short (too late), for a reasonable fee, you can consult with a professional appraiser who knows your market. The appraiser might be unwilling to say "buy it" or "don't buy it," but you would learn much about the value of the property, the expenses you might expect to incur (including mortgage scenarios), what you might get away with offering in terms of purchase price or rental rate, etc.
One additional thing to consider, and your professional can be specific as to the time frame (or ask the developer) is this: If it takes a while for all of the units to sell, will this inhibit your appreciation potential? How will supply and demand be affected, the longer the project takes to sell out?
Lastly, you might consider buying a condo that is larger than you need and leasing out the extra space. You will then have ready access to additional square footage should your needs change, and you wouldn't be forced to move and invite the hassle (and expense) of moving and changing your business contact information (address, phone, maybe even email).
Sincerely,
perishhate[ Edited by perishhate on Date 03/24/2004 ]
Thank you for the information.
Mike