Many startups and small businesses face a tough choice between buying and renting a warehouse. Both options come with their pros and cons, so it’s essential to understand how each route affects your business. To make your life easier, we’ve compiled our research and created a brief guide to help you determine which option is better between buying and renting a warehouse. Let’s get right into it.
Buying a warehouse
Equity
Purchasing a warehouse will allow you to build equity over time. The monthly payments that you’ll pay to the lender will create capital for your business. Over time, your warehouse’s worth will increase, and it will become a valuable asset for your company.
If your business runs into cash flow trouble, you can use it as collateral to obtain asset-based loans to meet your short-term financing needs.
Stability
Buying a warehouse gives you a sense of stability. You don’t have to worry about vacating the space if your landlord chooses not to renew your lease. It will help you avoid costly relocation, which can also disrupt your business operations.
Moreover, you don’t have to pay increase rent after every renewal of the lease. You’ll be able to save money and focus on your business operations without any hassle.
Flexibility
Owning a warehouse will provide you freedom and flexibility to make permanent changes to the property and make renovations as you deem necessary. You won’t require a landlord’s permissions to make adjustments like building extensions or layout changes.
Hence, you’ll be able to optimize the warehouse to tailor your specific needs to maximize efficiency and space.
READ: Top Tips That Will Help You With Warehouse Selection
Renting a warehouse
Cost savings
Renting a warehouse means that you won’t need to pay for general property maintenance, which can be a big problem for businesses running low on cash. The landlord will be liable to pay for the expenses, depending on the lease agreement.
However, this cost-benefit is only realized for long-term lease because if the owner decides not to renew the lease, the relocation cost will nullify the savings.
Flexibility
Leasing a warehouse also provides some flexibility in terms of moving to different places. If your business isn’t established and you’re unsure about the inventory requirements, you can rent a warehouse until you determine your business’s plans.
If you find the warehouse smaller or bigger than you need for the foreseeable future, you can always switch to a different one without any hassle.
Final verdict
Both options come with pros and cons, but buying a warehouse makes more sense in most cases. It provides greater control, more stability and helps build equity over a long-time.
If you don’t have enough capital to buy a warehouse, you can always apply for short-term financing like hard money loans to get easy access to funding until you find a more permanent finance source.
Global Capital Partners Fund is a leading private lender that provides numerous financing solutions, including hard money loans, across San Antonio, Dallas, Houston, TX. Many businesses depend on the company’s expertise to acquire funds to meet their financial needs. For more details about their services, call at +1-800-514-7350, or visit their website.
ALSO READ: For Real Estate Investors: Investing in a Warehouse Space
