Deciding whether to buy or lease office space is another crucial decision that any business may have to make, whether a company is just starting out or an existing one that is considering an expansion. Although considerations to either buy or lease vary greatly from one company to another, there are two major factors that need to be given much weight by either one: the business capacity and the benefits to be gained.

Below is a list of helpful questions that will point out important facts you need to explore about leasing versus buying office space for your organization.

• Do I have sufficient funds for a cash investment? Depending on your credit and your chosen lender, when you plan to purchase property a down payment of about 10% to 25% of the total purchase price is necessary. If you choose to lease, you will typically require a cash investment totaling the first and last month’s rent, which is equivalent to only about 10% to 15% of the total cash investment needed to lease property.

• Is this the best time to invest this amount of capital? Since a large sum of money can be needed when you decide to purchase property, this investment cost should be carefully considered. You can do this by comparing the anticipated profit that the business could gain if the cash needed to pursue property ownership were spent on other investments. If there is little to no difference, you might be wise to consider purchasing office space at this time.

• Does buying my office premises hinder the growth phase of my company? Another major consideration in leasing versus buying office premises is the performance of your organization in the current market. For a start-up business with growth potential not yet fully determined, renting is probably the best decision to make. This would allow the venture to be more flexible and have fewer obstacles to growth. Purchasing owned office premises could be considered when the business is more mature and stable.

• Is my company ready for fixed costs or variable costs? Buying any property means acquiring a fixed cost in the form of a long-term fixed mortgage rate which will need to be included in your overhead costs and will not vary much over an extended period of time. On the other hand, the market for leased space will dictate what your business will pay for office space with that amount being subject to the variance of the leasing market over the period of time that you are leasing. Depending upon your location and your financial stability, one of these choices will be better for your business.

• Does my company have the ability to manage the purchased property? There is a need for good property management if you own the work premises for your business which usually requires an employee dedicated to this function alone. Leased office space would be managed by the owning company, freeing an employee to perform other functions for you. There is a tendency for an organization with poor property management to acquire more office space than what they need at the time, leading to a debt obligation that doesn’t allow the business to grow fast enough to meet that demand.

• Have you considered the legal and financial aspects of owning office space? Because of the differences that exist in writing off business expenses against income, especially property expenses, it would be wise to consult a tax specialist and/or an attorney for advice. What is right for one company may be wrong for another company; each one needs to individually consider their own current status before making a leasing versus buying office space decision.

There are many factors to take into consideration when making a decision regarding leasing versus buying office space. The wise choice is to request assistance from commercial real estate professionals who help people make this type of decision every day. In addition, they will know the local market better than most other businesses or individuals. Good luck in making the best decision for your company!