Whether your business needs a new warehouse or an industrial space, you might be wondering if it would be more profitable to purchase or lease the space. Our New Jersey commercial real estate attorneys examine the pros and cons of both methods to help you determine the best option for your company.
Pros & Cons of Purchasing Commercial Property
Benefits of owning a warehouse or industrial space include:
- Equity: One of the major advantages of owning commercial property is equity. Your ownership stake in the property could grow as you pay down the loan principal and interest. You can also use the equity as collateral for future financing.
- Appreciation & Tax Breaks: Owning commercial property can also be beneficial since it may appreciate and grow in value over time, and it might also come with tax breaks.
- Future Rental Opportunities: As an owner of the property, you can rent it to other tenants if your company doesn’t need the space in the future.
Disadvantages of owning a warehouse or industrial space include:
- Upkeep Costs: However, one of the cons of owning commercial property is that you will be responsible for upkeep expenses, such as property tax, insurance, repairs, and maintenance.
- Lack of flexibility: Being the owner of a warehouse or industrial space will tie you down to that location. Your business won’t have the flexibility to move production or inventory to another location.
Pros & Cons of Leasing Commercial Property
Benefits of leasing a warehouse or industrial space include:
- No Down Payment or Upkeep Costs: If you lease a space, you won’t need to worry about having a down payment or take responsibility for building maintenance.
- Not Locked Down to Mortgage: Leasing a warehouse or industrial space can allow you to stay or move when your lease is up.
- Tax Breaks: You might be able to deduct the entire monthly lease payment as well as ongoing costs, such as utilities.
Disadvantages of renting a warehouse or industrial space include:
- Exorbitant Rent: Depending on the area, your monthly rent may be the average monthly mortgage payment. You should research your desired areas before making your decision.
- Rent Increases: Leasing prices may increase over time, making it difficult to plan for long-term overhead costs.
If you need assistance with your commercial real estate transaction, contact M. Ross & Associates, LLC today at (201) 897-4942 to schedule a consultation!