With commercial property values still at attractive levels and leasing rates rising in many cities, it makes sense to ask the question: As a small business owner, am I better off continuing to lease space or should I pull the trigger on buying my own building?
Here are 5 key things to consider:
- Monthly Cost – In buying a building, if you can keep your monthly mortgage payment under 30 percent of your gross monthly income, it may make sense for you to start shopping with a commercial real estate broker. A great tool to help you is a lease vs buy calculator – click here.
- Debt Picture – Total mortgage payment or rent plus other debt payments you have should not exceed 35 to 40 percent of your gross monthly income
- Credit Score – The higher your credit score the better interest you’re likely to get from a bank. There are many online credit score services available, but most will cost you. Check out two free by clicking here. A small business owner with a score of 760 could pay three percentage points less in interest than someone with a score of 580.
- Equity – Just like buying a home, the longer you plan to work at a particular location the more it makes sense to buy your facility. Often people refer to building equity as investing in yourself.
- Taxes – there are no tax benefits when you lease space. Alternatively, you can significantly reduce your tax burden by owning your own building. Consult your CPA for tax advantages particular to your situation.
If buying a building sounds like an option for you, contact one of our loan experts in your area who can discuss the SBA-504 loan program with you.