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To Buy or Rent, a Small Biz Dilemma

By Andrew Chow, Esq. on September 12, 2012 | Last updated on March 21, 2019

Is a small business owner better off renting or buying space to set up shop? It's an age-old question, but answers are changing a bit thanks to the evolving habits of modern American workers.

Shared office space and telecommuting are just two types of alternative work arrangements that are turning old arguments upside-down in the buy-or-rent debate.

Still, traditional concerns about cost control are on the tops of business owners' minds, as a New York Times blogger recently pointed out. Here are five questions you'll want to ask yourself if you're facing a buy v. rent dilemma:

  1. How much space do you need? Depending on how "small" your small business really is, it may make more sense to start out renting shared workspace or even a "virtual office" where you can rent rooms as needed. This may especially make sense if most of your staff works from home. If you're stuck with too much space, perhaps you can rent out some rooms to make some additional revenue.
  2. Is your business size stable? A fast-growing business may quickly outgrow its space, so it may make more sense to look for a short-term lease. Then again, how often do you want to deal with the hassles of moving and uprooting your business? If you're confident in the stability of your business, it may be time to buy.
  3. Can you get a good deal? One small business owner told the Times she bought her building in an estate sale. With foreclosures dotting the landscape, you may also be able to land a good deal on a parcel of property. Sit down and compare the costs of renting to what you might be able to save if you buy.
  4. How permanent are your neighbors? You'll want to seriously consider whether you can put up with established businesses next door, or even above you. For example, one yoga studio owner suffered for years beneath a leaky bar, she told the Times. You can avoid those types of problems by scoping out a potential location before putting any money down.
  5. Will you be able to resell the property? When you outgrow your office space or just need a change of scenery, your property's resale value will come into play. A good real estate agent or business attorney can help with negotiations and contract issues, and can also give you advice as to whether it's best for your small business to rent or buy.

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