Nearly 50% of businesses fail within the first five years in the United States. However, there are measures you can implement to help avoid this. Having the right facility goes a long way when it comes to the longevity of your company.
This is especially true when considering what warehouse you use. A common obstacle people encounter is deciding between buying and renting a commercial warehouse.
Making the right decision is crucial, and it’s important to understand the key attributes of both. Let’s dive in.
Renting a Commercial Warehouse
Most people consider this as their primary option because it requires less money upfront. As such, it’s often the ideal choice for small business owners. Owners of larger companies may not need this flexibility, though.
Renting provides you with a fixed monthly cost, allowing you to have better insight into your future expenses.
Having the ability to leave the property is also something to consider. Sudden changes in your life could require you to relocate, which can be fairly difficult if you own the warehouse.
You can also take advantage of tax breaks for property expenses even though you rent. Unfortunately, renting does not provide you with equity in the property. This also means that you can’t benefit from appreciation.
Since you don’t own the warehouse, you won’t be able to rent out space to other people. This will prevent you from establishing passive income in this manner. Those who read also won’t have control over the warehouse itself.
So, you will need the landlord’s permission to make modifications. Depending on who owns the property, they may have tight restrictions in place.
Buying a Commercial Warehouse
There are many positive aspects of purchasing a warehouse instead of renting it.
One of the most notable is that you will build equity over time. This allows you to get much more out of the money you contribute to the property.
Your commercial warehouse will also serve as an asset that can increase your net worth. This can come into play in the future, such as when looking for financing to purchase an additional commercial property.
If you don’t use the entirety of the warehouse, you can rent out the extra space to other business owners.
In certain circumstances, you might even find that you can generate substantial passive income. Owning a commercial warehouse can also give you a tax break on non-mortgage expenses, interest, and depreciation. Over time, this can easily add up to a significant amount of money.
You’ll also have full control of the property. As long as you don’t infringe upon regulations, you’re free to do what you want with it.
It’s not all good news, though.
Purchasing a commercial property often requires a very large down payment. Many people simply can’t afford to contribute this amount of money. It’s notably more difficult to qualify for financing when it comes to commercial properties compared to residential ones.
You’ll also need to budget for liability insurance.
Of course, there’s always the possibility that your property loses value. While this is mostly out of the control of property owners, it’s still something to consider.
Making the Right Choice
It can be tough to decide whether you should buy warehouse property or rent warehouse property instead. In order to make the best decision, you should assess your primary needs.
If you value predictability and flexibility over other attributes, it may be in your best interest to rent. The same can be said for those who don’t have access to sufficient forms of financing. People who want to benefit from building equity should consider purchasing a commercial warehouse instead.
There’s also something to be said about the level of control that ownership provides. If you feel as though you will want to modify the facility later on, you should buy instead of rent. Owning the property will also give you the potential to establish a passive income stream.
Getting Started
To get started, it’s in your best interest to work with a professional. They have all the tools and resources necessary to help get you on the right track.
When searching for someone to work with, take a look at their past reputation to gain insight into what you can expect. You should also consider if they typically work with clients like you.
For example, you might not get much out of the professional relationship if they frequently work with people who have a much larger budget than you do. They should be highly communicative and committed to helping you reach your goals.
If they don’t seem interested in helping find the right property, be sure to look elsewhere. This is a red flag that you shouldn’t overlook. Finally, inquire about fees and miscellaneous expenses that you’ll incur.
The last thing you want is for financial issues to arise during or after the transaction. As long as they are transparent, you shouldn’t encounter any problems.
Take Action Today
The commercial real estate market changes on a daily basis, and it’s easy to miss opportunities by waiting too long. Once you make your decision, it’s best to look into taking the next steps for your commercial warehouse as soon as possible.
Reach out to us at (877) 775-9625 to learn more about how we can help connect you with your ideal property. Our professional staff will help ensure the process goes as smoothly as possible.