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Commercial property in Minnesota: Should you buy or lease?

On Behalf of | Jun 20, 2024 | BUSINESS & COMMERCIAL LAW - Business & Commercial Law

In the business world, your decisions can shape your success and ability to operate smoothly. You may think the seemingly simple choice of leasing or purchasing a business space will have little bearing on your operations, but that may not be the case.

The truth is both can pose potential upsides and downsides. Learning about them can help you choose the option that best promotes future growth and does not squander your business or personal resources.

Leasing: lower upfront costs vs. less control

Leasing offers a chance to grow your business in a fresh location without a massive down payment. Predictable monthly rent allows for easier budgeting, and some leases may shift maintenance burdens to the landlord. 

On the downside, you relinquish control over renovations and miss out on potential property value appreciation. Lease renewals could come with rent hikes, and ultimately, the space will not be yours.

Buying: stability and control vs. greater financial risk

Buying can contribute to long-term business stability and the potential for property value growth. You will have the right to customize the space to your needs and, if desired, enjoy rental income from subleasing. 

On the downside, purchasing requires a significant upfront down payment and ongoing maintenance costs. Unexpected repairs can further strain finances, and selling the property during economic downturns might prove challenging.

Making the choice

Whether to lease or buy usually hinges on business goals and financial health. Startups with limited capital might favor leasing’s flexibility. Established businesses seeking long-term stability and potential wealth-building may prefer buying. 

Learning about any legal risks associated with the commercial properties under consideration can also help guide your final decision.