THE BLOG
09/02/2014 11:37 am ET Updated Nov 02, 2014

Should Your Business Buy or Lease?

Home ownership is a fundamental part of the American dream, and, for entrepreneurs, the same feelings often translate to owning a permanent space for their company. Owning a building can represent stability, success and financial security, but, despite the attractions owning often boasts over renting, logistic and economic realities often dispel the dream of ownership and replace it with tough financial facts and additional stress.

When weighing the pros and cons of renting versus owning, these five questions may help add or subtract from the decision scales.

Would buying restrict future opportunities?

Your business has grown enough to consider purchasing a permanent space, so it's possible the business may continue to expand. If the building under consideration doesn't support future business needs, owning may cause more problems than it solves. The stability of ownership may choke opportunity later, so consider how much flexibility your company may require later on.

What is your exit strategy?

If your business continues to thrive, it's possible you may outgrow the space. If you rent, it's easier to move on and move up, but if you own, you'll end up as a landlord or a seller. Consider whether you're realistically prepared to take on this responsibility, and, if so, ask what value the space has in the current and projected marketplace. Will it be easy to find a tenant? Would you be able to make money on the deal?

What's the true cost of ownership?

First time homebuyers are usually charmed by ownership's allure, but extra costs soon set in. Potential renovations, unavoidable maintenance and other bottom line necessities to preserve asset value can put serious dents in profit. Leasing may appear more expensive than owning, but factoring in figures for replacing HVAC units or bringing a building up to electrical code could be a game changer.

Who will manage maintenance and repair?

Most landlords hire professional property managers to oversee the facility. When you own an asset, these responsibilities must be taken into account. You, an employee, a contractor or an outside management firm must do the work. No matter who does the job, there will be an additional expense or time investment.

Why do you want to own?

Before signing on a new mortgage, take a hard look at the real reasons owning is a priority. Whether it's purely emotional, the symbol of independence or a company philosophy, understanding the pull behind your wish to own is a huge part of the decision. There is no right or wrong answer, but evaluating why owning is important may help you make the best choice for your life and your company.

Whether to own or lease is a major decision. Purchasing property comes with extra responsibilities and limitations, but it may also be a boon to the long-term investment in your company. Answering these five questions will help you find clarity and make the decision with stronger assurance.