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lease or buy

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boobesque | 23:57 Thu 14th Jul 2005 | Business & Finance
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imagine if i had money and wanted a business. i can either pay �300,000 to buy the building and business or �40,000 for a ten year lease plus �60,000 a year rent. clearly i would prefer to lease to begin with until i can establish myself. what are the pro's and con's of leasing over buying?

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Hi boobesque,

In my opinion what's there to consider?think on this:~

Buy(for whatever period of time you own the building/business) �300,000

Lease (for ten years,only) �640,000 total.

What you also have to bear in mind is,after the 10 years you will have to renegotiate the rent,what if doubles,you would really be over a barrel, especially if the business had taken off.

I fully understand your idea about establishing yourself,BUT once you agree to the lease and 10 years rent you are stuck with it.

If you buy freehold it will be much easier to sell the property if the business does not take off.This would be far more difficult with a lease(if not dowright impossible).I mean if you get the business going and after 8 years it folds,who would want a 2 year lease on a property,and surely you would be stuck with the rent for the rest of the lease as well?

To finish, I think a Freehold is preferable(though of course more expensive in the initial outlay) but it enables you to be your own boss, and not keep looking over your shoulder at what the Landlord is doing with the Lease or Rent! and to take control of matters if (god forbid) things go wrong with the business.On a Freehold you might be able to recoup some money in that case,I cannot see that happening on a Leasehold.

I trust someone will come in here and shoot me down if I am wrong! LOL

I would always prefer to buy as opposed to lease as mystress says - however bear in mind the following points:

1) You will need in all likelihood a 25% deposit for a commercial mortgage - �75,000

2) You are responsible for the maintenance of the building - if you rent (depending on your lease) the landlord would have to maintain

Now-a-days a lot of land lords would not be responsible on repairs, so make sure you check the building out first and negotiate if repair is needed on leaseholds but they still might refuse to repair. So there are not a lot of difference in buying or leasing depends on the lease.

I personally think buying the business in this case is a better deal than lease because of the price difference is not that great as mystress said but you have to invest more money.

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