Decision Of Leasing Or Buying A House
After determining facilities, needs and locations you need to consider the below factors:
Compare whether you will buy or rent – The comparison related to economics of leasing and buying needs to be taken into consideration. The core advantage of leasing is the initial outlay which determines the gain of using an asset. This initial outlay is less in case of leasing than purchasing the rental properties in Central Coast. If you buy the property instead of leasing, you would get the appreciation benefit in the property.
Analyse the cash flow – Cash flow analysis is one of the good factors to determine whether to buy or go for rental properties. To do cash flow analysis you need to consider lease terms, financing and purchase terms, income tax rate, and expected useful life, estimated value of the asset and cost of capital. Cash flow analysis gives estimation of how much money to be utilized to cover the additional costs after tax.
Want to do additions to the property? You may want control on your property and want to make some renovations or additions to your property or want to change the business hours. You should consider long-term costs in case of leasing. Purchasing the house property is cheaper more than leasing. In case of service and retail businesses location is an important factor. Businessmen should not lose any profitable business location only for rent escalation. If you would find that the value of the land and the rented property would increase in future you should not lose the same. Purchasing a house property could save taxes a lot. If you consider cash flow only, leasing is better option than purchasing the property.
If your business is facing financial difficulties, then credit facility may not be available to purchase a property. If you find that the values of the property will be stagnant in future, you should drop the opportunity of purchasing the property. In case of leasing you need to know some factors like Net lease, Gross lease, Fixed lease, percentage lease, Step lease, escalation clause, lease term, subletting opportunity, rental rate, maintenance, competition, taxes, modifications as well as improvements and liability and insurance. You also need to consider destruction, purchase option, renewal option, and landlord’s restrictions and solvency on the use of the land.