When starting your own business, one of the initial (as well as one of the biggest) hurdles you will face is picking the perfect office space for your company.
Not only will you need to consider the type of work you do, but also the number of employees you currently have at hand, and where you envision your company to be in the near future.
Take Singapore, for example. When it comes to entrepreneurship, the country’s popularity is at an all-time high, and that fact is especially true for the tech department.
With an impressive list of home-grown startups like Grab, ReferralCandy, and 99.co; this island is considered to be the ‘next Silicon Valley’ and the perfect place to start a new business.
This is precisely where the dilemma of renting or buying a space becomes such a big issue.
And if you’re one such entrepreneur plagued with this decision, then today we have just the right guide to help you out.
Buy or Rent: Which one should you go for?
Whether you’re starting out big or small, picking the ideal workspace for your business is one of the most important tasks, which, in the long run going to speak volumes for your company.
And one of the biggest determinants of picking your office space will revolve around whether you want to rent or own your space.
However, the markets for buying or renting a workspace are often different and require varying amount of investments.
Where websites like GoSpaces.Co provides you with flexible leasing options, like hourly meeting room rentals; other portals offer buying rates that are reasonable and can help you get your very own space in no time.
So should you rent or should you buy it?
Let’s go into some of the pros and cons of both.
The Advantages of buying an office space
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The costs are fixed
If you’re locking in your commercial mortgage, then, in the long run, you will get a very clear idea of the costs involved in the running of your business.
The expenses get fixed, and you have an easier time managing the company’s finances.
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Lesser Tax Payments
Running, as well as owning your very own commercial space, can help reduce the amount of tax that you pay.
There might be tax deductions in the form of property taxes, mortgage interests as well as from other items.
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Opportunity for an extra income
Owning your workspace will provide you with the option of renting out extra office rooms to other companies and use it as an additional source of income. Neat, isn’t it?
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Retirement Funding
If you own a commercial space, then you can always choose to have that particular property appreciate over time. You can then sell it for a very high profit, and fund your own retirement in the process.
The Disadvantages of buying an office space
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There is no flexibility
A business that is still growing will most definitely have a lot of unexpected needs in the future.
As the company builds its structure, there will be a constant need for newer employees or even machinery to tackle the different aspects of work that come your way.
Because of this very reason, the office space you own may become inadequate and force you to sell the property.
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Higher Upfront Costs
Getting a commercial space of your own will initially cost far more upfront and might turn out to be a huge burden for certain businesses.
From property, appraisal to maintenance costs, there are going to be a lot of large down payments along with some minor property improvement costs you will need to consider.
The Advantages of Renting your office space
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Property image leads to company image
With space renting, entrepreneurs have the chance to look for places that have a good location and belong in reputable districts.
This factor is crucial for business which depend on location and image. Businesses that require their employees to travel a lot, ideally need locations that are close to public transport stations like rail and subways.
Singapore real estate market overviews today, show that there are a lot more co-working spaces in the island than what there used to be a few years ago.
As the ease of transportation and accessibility becomes more and more important to commuters, location becomes an ever-growing concern for entrepreneurs.
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Allows for a flexible working capital
As a large chunk of your money is not tied up in real estate, you can use up the existing capital to respond to opportunities in the market.
This will help your business grow a lot faster and not limit your resources when you will need to expand and grow.
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Affords more time to focus
Any type of ownership, including property ownership, comes with its very own brand of stress and headaches.
Leasing, on the other hand, will free up a lot of your mental space and help you to focus solely on running and growing your business in today’s competitive market.
The Disadvantages of Renting your office space
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The Renting costs vary
One of the biggest problems to leasing is the annual rent increase that the space is subjected to. This makes your capital management harder, especially when you need to consider the ridiculously high cost at the time when your lease expires.
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There is no Equity
When you are renting your office space, you will be (in practice) funding someone else’s retirement with your lease payments.
But owning your space, on the other hand, will allow you to go into the property management business yourself.
Final Thoughts
With both buying and leasing your own office space, there are a lot of pros and cons involved.
So, your choice will primarily depend on what you want your business structure to be like and the number of resources that you have in hand.
However, for newer businesses that are just starting out with a smaller resource strength, renting is always going to be the wiser option.
Investing in real estate 2019 requires you to be aware of a lot of the prevalent trends in the market, being aware of which, will help your business grow exponentially.
We hope that you enjoyed our guide today.
Till next time!