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Leasing versus owning commercial property

On Behalf of | Aug 4, 2017 | Commercial Real Estate |

One of the big decisions a Philadelphia entrepreneur has to make early on in business plans is whether to purchase a building for the business or instead rely on a commercial lease to secure a location for a new business venture.

Both owning and signing commercial leases present certain unique business advantages. For example, leasing allows a business owner to take the entire rental payment as a tax write off, whereas an owner cannot deduct all expenses related to homeownership and will generally have to capitalize any depreciation on the building.

On a practical side, leasing costs less up front. This leaves the owner with more money to invest in other areas. Finally, leasing also means an owner has to worry less about issues involving the maintenance of the property, as the landlord will typically assume at least some of those responsibilities.

On the flip side, commercial leases usually only pay off financially when an owner stays in the business property in the short term, less than seven years and definitely no more than 15 years. Long-term, ownership usually pays off. Like owning a home, owning a piece of commercial property gives the owner a chance to build up equity in a building, which increases the value of the business and gives the owner some leverage when the business needs credit.

Whatever the choice, is important for Philadelphia business owners also to remember that there are a number of important legal considerations an owner needs to think about before signing either a lease or a purchase agreement. For example, commercial leases are not like residential lease agreements, which are fairly standardized. A wise business owner would always want to know the precise terms of every proposed commercial lease.

Post Type: TOPICAL


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