• Riviera Maya: +52 (984) 104 4223

Buying or renting an office, which is better? You should read this first.

Over time, the great question has arisen as to whether to buy or rent an office. Which is better? Should I make the effort and buy office real estate or continue renting? 

FOLLOW US ON
Facebook Instagram Linkedin Whatsapp
RELATED ITEMS
SUBSCRIBE TO OUR NEWSLETTER

A big topic of debate has been the option of buying or renting an office, it is important to take into consideration some essential elements to make the best decision.

There are several challenges and adversities that companies face in the search for success, between seeking to have a large profit margin to invest in new projects there are many more elements that must be considered, salaries, work equipment, supplies and not least; the office or work center.

This is when the company asks itself the million dollar question, Buy or rent an office, which is better?

Given this scenario, we present some important points of both operations to give you a broader picture, and you, as head of the team, will be able to make a decision that benefits your company.

What should I do, buy or rent an office?

There are several indicators that will give you the guideline to know if you are on the right track buying a property for your business.

Be realistic about the life expectancy of your company. Of course no one likes to admit that the company's sales are decreasing but if this is the case, buying a real estate for the company may not be the best option at this time. On the other hand, if your company is growing more and more, increasing profits month by month, you can make a projection of the life of your business, if your probabilities are of high profitability in the next years, buy.

There is an indicator called "price to rent ratio". which basically consists of dividing the sales price by the annual rent of the property. This little formula will tell us if it is a good time to buy or if it is better to continue renting.

If the result is greater than 20 then it is more convenient to continue renting. Otherwise, if the result is less than 15, it is time to buy. For example:

Suppose we have an office in which we pay a monthly rent of $10,000 pesos which is equivalent to $120,000 pesos per year, the new office where we are looking to move has a sales cost of $1,000,000 pesos, applying the formula of "price to rent ratio" we have that 1,000,000/ 120,000 = 8.3

This example tells us that it is time to buy, however, you should also take into account the current situation of the company, if it is going up, do it, if the life expectancy of the business is not so promising, don't do it.

If on the other hand, in the case that the exercise of this formula has given you a result higher than 20, our recommendation is that you continue renting offices, strengthen your company by investing that capital to generate more profits and when you find the opportunity, take it. 

Lease office property

renta-oficina

Many people mistakenly see the option of paying rent as "wasted money", however, these rent payments should be considered as an investment since an office, work center, warehouse or whatever you want to call it is the core of your business, it is the place where the activities that will bring fruits to your company are carried out and also the rent brings with it certain advantages: 

  • You do not decapitalize the company and that money can be used to invest in different areas of opportunity to grow the business.
  • Depending on your contract you can move from time to time, depending on the growth of the business, for example you can move to a more central location or you can rent your warehouse in a strategic point where the exit to the highways is easier and faster, even saving on logistics costs.
  • It allows you to concentrate more on your business, while in your own office you are in charge of the damages and details of the property, in a rented office it is enough to inform the landlord to solve the problem.

Buy office real estate

If you have already decided that the purchase of real estate is what your company needs, it will be helpful to read a little bit about what is coming up.

Ideally, the company should have the money necessary for to carry out the cash transactionIn this way, two payments can be agreed upon, one, the down payment and the other, the settlement amount at the time of the deed. This option will be of great help for two reasons, you will avoid getting into debt for years with a loan or mortgage credit and two, you will save a lot of money by avoiding the interest generated by a loan.

Loans and mortgages

However, it is almost a utopia for young companies to achieve buying a property in cashis undoubtedly a heavy expense and even heavier if they are considering making the cash payment, that is why a mortgage loan or credit is the most common option taken by company managers.

In this sense, the initial expenses must be considered, it is not only enough to contemplate the monthly payments, remember that buying a property represents an important initial expense, down payment, commission for opening the credit, taxes and notary expenses. Taking into account the initial expenses you will be able to avoid liquidity problems, for example, by taking out the payroll in time and form, avoiding even bigger problems with your payroll.

According to information from experts in mortgage loans, in Mexico there are interest rates that can range from 12.5% to 18% annually, with terms that could reach up to 10 years, based on this information you can calculate your average monthly profit and consider this expense that you will have month to month so as not to be too "hung up" with the other payments that the company has to make. 

In conclusion, if your company is ready and prepared to acquire real estate, it is only a matter of waiting for the right moment to make the transition from rented offices or work centers to a work environment of your own. 

Source: Inmobiliare

Author picture

Leave a Reply

Your email address will not be published. Required fields are marked *

en_USEnglish
es_MXEspañol de México en_USEnglish