Small business owners are faced with the decision of whether to rent or buy commercial space when starting up their new restaurant. This process is complicated by many factors, but there are some clear advantages for buying over renting in most cases.
There are many benefits to buying a commercial space rather than leasing it. One of the most important is knowing when to buy. There are some signs that will help you know if now is the time to buy.
This post is part of our Restaurant Business Startup Guide, a collection of articles to assist you in planning, starting, and growing your restaurant!
Even more crucial than a great idea and terrific cuisine is a fantastic location when it comes to getting your business off the ground. A high-traffic location near or in shopping malls and main roadways is ideal for attracting new customers. However, whether you lease or buy relies on the length of time you’ve been in company and the size of your client base.
3 years from start-up
If you’re just starting out in the restaurant business, leasing is the ideal option for the following reasons: 1. The greatest places for new restaurants to open are in well-established shopping malls with high foot traffic. Leasing is often the sole alternative in certain situations.
2. We’re all aware that restaurants are a high-risk industry with a limited lifespan. Short-term leases make it simple to hedge your bets. If your firm is suffering or you need to shut down at the end of your lease, you may quit without facing any financial or legal consequences. Also, if you do need to leave the lease for whatever reason, it’s considerably simpler (and less detrimental to your credit history) than it is to break a mortgage.
Find a registered commercial real estate agent or broker to represent you, someone who knows the complexity of commercial leases, to ensure you obtain the finest leasing option available. They will assist you in finding a site and negotiating a lease that best meets your demands, acting only in your best interests. As a bonus, the landlord usually reimburses their time, so having a professional represent you (and safeguard your company) in a real estate transaction usually costs you nothing.
3 years or more in business with a loyal customer
You might consider acquiring rather than leasing a place if you’ve established your company, gained returning clients, established a great credit history, and established a stable customer base. Frequently, landlords increase their prices, limiting your ability to alter your home. When you own a home, you can control your expenditures with a fixed mortgage, which frees up money and improves cash flow, and customize the space to meet your specific demands. You have the option of expanding to a second site, purchasing an existing place, or starting from scratch. Commercial pad sites are generally placed close to the high-traffic retail locations I discussed before, enabling you to enjoy the best of both worlds—an equity investment and the advantage of an existing retail center. Restaurants may take use of SBA programs that complement those offered by their lender, providing them additional alternatives when it comes time to buy. Simply choose skilled people to represent you and operate in your best interests, and do your study ahead of time to ensure that you receive the best bargain possible.
Any restaurant may work toward the aim of purchasing a commercial property. Set yourself up for success by incorporating it into your long-term development plan, coupled with wise credit-building techniques.
Rubyran2626 contributed this photo.
Watch This Video-
When deciding whether to lease or buy a commercial space for your restaurant, you need to know the difference between the two. A spreadsheet can help you decide which is right for you. Reference: commercial real estate lease vs buy spreadsheet.
Frequently Asked Questions
What are the factors to be considered while making a lease or buy decision?
A: There are a few factors to consider when making a lease or buy decision. These include the length of the lease, interest rates, and if you have an option for buying at a later date.
How much does it cost to rent space in a restaurant?
A: The price to rent space in a restaurant varies depending on the size of the venue, how much time you need it for, and other factors. You can find out more by checking with your local landlord or asking around at restaurants near you.
What to know before renting a commercial property?
A: Youll want to understand before you start that the property is not owned by the tenant. Instead, its leased from a third party entity called an assignor. It can be difficult for tenants to change this fact, so if renting becomes difficult after moving in, consider looking at other options.
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