The decision to buy or lease Sydney CBD office space is a serious consideration, especially for the small business owner. Ultimately, you’ll need to get a good clear picture of your company’s financial position and then consider your options. Here are some starting points and questions to ask.
What are the Opportunity Costs?
Deciding to lease or buy needs to be based on your available capital outlay and the opportunity costs involved – how will your money be better spent?
While buying office space gives businesses the freedom to make improvements in the future, the initial upfront costs of the purchase will be prohibitive to most small business operators. Banks are often hesitant to lend a hand to new businesses that lack a long standing operating history. Additionally, other costs such as appraisal fees, property taxes, and maintenance expenses will continue to tie up working capital throughout the period of ownership.
The advantage to purchasing one of the many commercial offices Sydney has to offer is that long term ownership allows for property appreciation and increased equity.
Meanwhile, leasing doesn’t require the large up-front cost that purchasing demands, so it’s much easier to finance especially if you’re just getting into business. However, as your business grows, the lack of equity build-up, possible annual rent increases and forced relocation can be some of the drawbacks involved with the decision to lease.
What are the tax implications?
For the purchaser of Sydney CBD office space, repairs can be written off and deductions can be taken on the interest of your mortgage, property taxes, and other qualifying expenses. Annual depreciation deductions can also be accounted for. Meanwhile, leasing generally allows the renter to deduct the entire cost of the rent as a business operating expense.
Can I commit the time?
Ownership of any property generally requires a deeper level of understanding and involvement with the complex rules that govern the commercial property market – much more so than leasing. As a commercial property owner, more of your time will be spent on the hassles of owning which may interfere with your focus on business growth and development. A certain lack of flexibility exists because the owner cannot simply pick up and move if the location becomes less than expected or if the business rapidly outgrows its facilities.
You’ll have plenty more questions to ask – but fortunately, you don’t have to answer them on your own. A financial planner or accountant will be able to provide more information that is more specific to your business needs and help you make that all-important breakthrough of whether to buy or lease.
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