When starting a business, location, storage, and operational space are among the most important things to think about. Unless you’re a freelance service provider whose workstation is always the client’s site, you will definitely need an operational base for your business. Now, even for those who run their businesses from home, it reaches a point where you need to expand, and the spare room or small space in your basement is no longer enough to accommodate your business inventory, tools, and materials.
If you’re running a workshop, expanding your business means more equipment, more materials, and so forth. You will also require more space to cover a larger client base. When expanding to provide finished products and services to customers beyond just your local area, you may also need to establish branch workshops in the new locations. But the big question is; which one is more advisable between renting and buying a workshop or operational space? Well, the best answer to this is that it depends on several factors. This piece explores some pointers on how to decide whether to buy or rent a workshop.
What’s The Type and Size of Your Business?
This is one of the most important factors to consider before making your decision. The type and size of your business will largely dictate which option is best between renting and buying. This is because different types of businesses have different needs when it comes to the workshop, which is basically your working space, and this makes it even more confusing to make a decision. When deciding whether to buy or lease workshop premises, it is advisable to consult a reputed commercial real estate agency that deals with both rentals and for sale properties in your area of interest. This way, you’ll have a plethora of options to choose from and the experts will guide you through depending on your business’s needs so you can make an informed decision. The facility you get should suit your business in terms of space, convenience, and the kind of work the premises will be used for.
As earlier hinted, location can have a huge impact on your business’s growth and success. If you need to get things going faster, renting can be a great option. As a matter of fact, “for sale” commercial properties are hard to come by in certain locations, especially city centers. You can move into a rental property quickly and get your operations up & running. On the other hand, buying a workshop can be ideal if you’re not in a rush and are looking for a long-term solution that can help build credibility and establish a reputation for your business.
This one is almost obvious. As an entrepreneur, buying or renting a workshop is basically an expense that eats into your operational capital or profit margin. To buy a home, you will need to cough up more money upfront, which can either be in cash or a mortgage, which would still need you to raise a mortgage deposit of about 40% of the full price. Nonetheless, it can be more advantageous in the long-term because that’s an asset that your business will own. While you may be required to make monthly payments if you purchase using a mortgage, it will reach a point when the business fully owns the property.
This is unlike renting, where you’ll have to pay rent each month over the business’s lifetime, whether you made a profit or not. Moreover, rent tends to increase with time, in some cases after every lease. All the same, your immediate budget will dictate the best option for you. If you don’t have enough capital to buy or your credit is not too impressive, you can always start by renting and buy later.
To add something about the costs, renting seems to be more convenient as far as maintenance is concerned. More often than not, the landlord is responsible for maintenance and even repair for some parts of the rented property. If you buy a workshop, however, all maintenance will be your responsibility, and this is something you’ll need to allocate a budget for.
Your Future Plans and Value
There comes a time when things go south and you feel that you no longer need to be in business. What happens to the workshop you bought in this case? What if it’s too small and can no longer serve your business needs? Well, you can always sell it or sublet it for income, but it takes time and comes at a cost. On the flip side, renting gives you more flexibility when it comes to moving out or closing the business. But then again, bought property allows you the convenience and liberty to change your space around to suit your business needs without restrictions. Also, buying a workshop allows you to add value to your business since in most cases, real property appreciates in value. It can also get you more tax deductions compare to renting.
Picking between renting and buying a workshop can be a daunting task. It requires research, patience, strategy, and careful thought. Luckily, the above pointers can help you avoid the headaches that come with making tough decisions like this one.