Purchasing commercial or industrial property can be a major investment that requires a large upfront cost. For small businesses and startups still establishing themselves, it may seem out of reach to buy a property outright. This is where a lease-to-own arrangement can be beneficial.
A lease-to-own agreement allows you to lease an industrial property with the option to purchase it at a predetermined price during or at the end of the lease. The lease period serves as a trial run to see if the property is a good fit before committing to a purchase. It also allows you time to improve your business operations and finances.
Here are some of the biggest advantages of going the lease-to-own route for industrial property:
Lower Upfront Costs
Instead of a large down payment, a lease to own generally only requires an option fee or security deposit to hold the property. The monthly lease payments go toward the future purchase price. This greatly reduces the amount of cash needed upfront.
Flexible Terms
You can work with the landlord to negotiate lease terms that fit your business needs and current capabilities. The lease provides the opportunity to back out if you decide purchasing the property is not the right decision.
Tax Deductible Payments
Lease payments can be written off as a business operating expense for tax savings purposes. Consult your accountant to utilize this benefit.
Appreciation Potential
Should the property value increase during the lease, you still have the option to purchase at the original price you agreed upon. This allows you to benefit from any appreciation on the asset.
Time to Improve Finances
The lease period offers time to focus on improving business operations and cash flow. A stronger financial outlook in the future may allow you to qualify for better financing with lower interest rates when you are ready to obtain funding to purchase.
Equity Building
Lease payments slowly build equity in the property over the lease term. You own more and more of the asset with each payment made.
Owning Commercial Property
At the end of the lease, the property is yours if you fulfill the terms. You now have a tangible asset to grow your business long into the future.
For those interested in owning industrial property but not quite ready for a huge purchase, lease-to-own can be the right middle ground. Be sure to carefully review any lease-to-own contract and consult professionals to look out for your best interests. With the right property and terms, lease-to-own can be a strategic move for an expanding business.
