According to industry experts. there's no "right" answer for when a business needs to consider the benefits of leasing or purchasing a warehouse property.
Some believe leasing is cheaper, while others consider that is not always the case because lease obligations can be similar to those of purchasing.
Whatever decision is taken. it's essential that advice from a solicitor and accountant is sought.
What are the pros of purchasing?
Tax perks: Owners can claim tax deductions of costs associated with owning, operating and maintaining abusiness premises.
Fixed costs: A long-term fixed commercial mortgage can give a business certainty.
Access to equity: Properties may be able to be used as guarantees in business dealings with suppliers, clients or partners.
Financing: Using a mortgage loan, monthly payments may end up similar or even lower than lease payments.
What are the pros of leasing?
Freeing up capital: Capital not tied up in a deposit for a property may be used for other opportunities.
Choice of location: Leasing allows a greater choice of properties in prime locations. It may be more affordable for some businesses, such as retail.
Faster response: leasing can enable a business to be more responsive to needs - such as moving to larger premises.
Business focus: The focus can be on developing a business rather than on managing a property.
If a business is well established and planning on staying for longer than 10 years, buying a warehouse can be a real estate investment. If a business is specialised with unique fit-out and machinery, improvements to the premises may need to be undertaken.
If a warehouse is being used as a general or distribution facility, with easily replaced fit-out, leasing may be more cost effective. Leasing is usually preferred for businesses that don't want to use their capital on real estate investment and for those not sure how much space they will eventually need.
(text taken from "Buying a warehouse - or renting? It just depends..." Wyndham Star Weekly - domain.com.au 30 May 2018 - originally posted in June 2018)
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