When starting a new company, one of the first decisions you have to make is where you will operate your business. Many entrepreneurs start out their businesses in their own homes, and some continue to operate a home-based business. However, depending on the nature of your company, you can run afoul of zoning ordinances, and sometimes your family and your business need their own spaces.
When considering commercial property, you have the option of either buying or renting it. Commercial space rentals Evanston IL have their strengths and weaknesses, as does buying commercial property.
Renting
Renting commercial space can save you the initial cost of a down payment on the property. This can help you retain liquidity during a period when money can be tight. Depending on the wording of your lease, you can also save on maintenance and upkeep, as these are typically the property owner’s responsibility. The ability to decide whether to renew your lease or move to a new location when it is up, gives you greater flexibility. You can deduct the money you spend on rent, utilities, and related costs from your taxes.
On the downside, a landlord may charge you exorbitant rent and/or hike it up periodically. This can end up costing you a lot of money without gaining any equity in the property.
Buying
While your mortgage payment on a commercial property is not tax-deductible, the depreciation is, so there are potential tax benefits to either renting or buying. You gain equity in the property as you pay down the principal and interest, which you can use to borrow against. Your property may gain in value, meaning that you can make a profit on it later if you eventually choose to sell it.
However, when you own the property, you are solely responsible for the costs of maintenance and upkeep. You typically have to put a significant down payment on the property, which can mean a higher investment upfront.
