Buy or rent own office meeting room
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Almost every startup has come across this question at least once in their lifetime and choosing the location of your growing startup’s headquarters is not an easy task. 

When you start a business that requires an office space, you have two options; either to lease or to purchase an office. These decisions are usually made upon a major financial investment, and there are pros and cons to each. 

If you have not decided on which would be the best option for you, here are some questions you should first ask yourself:


- Would you rather pay down payment or rent?
 If the idea of owning a property and allocating a chunk of your startup fund to acquire it excites you, then we have a clear answer here. Otherwise, you would have to settle on renting. Remember, buying still mean that you have to pay that monthly commitment but instead of giving money to someone else, you are investing in an asset.

- Will your startup requires relocation in the next 5 years? A lot of new startups will most likely expand their operations and this means there will be a need for more staff and work space. This will undoubtedly result in you having to relocate. However, if you plan to remain as a lean startup in the early years of your venture regardless of your increase in revenue, the obvious choice would be to stick to paying rent.


- Is location crucial for your business?
Having to rent near to, or in the city center may not be an option for some businesses, as a high monthly cost of owning the place will incur an unbearable early startup cost. Remember, even if you have just enough to pay the down payment you still have to consider other costs that are important for a new office such as renovation, utility upgrades, furnitures, office equipments and so on.

- Maintenance and Time. Owning an office means having to maintain it. Maintenance will be a responsibility unless you intend to hire cleaners or repairmen which will cost both money and time. On the other hand, basic cleaning and maintenance of office space nowadays are usually included in the rental agreement, which can potentially save you plenty of time and money.

Besides the questions above, here are some of the pros and cons of owning or leasing an office:



Pros of Owning an Office Space


(i) Fixed Monthly Payment. 
Throughout the duration of your mortgage you will be paying a fixed amount of money. Eventually, you will own the property and you can choose to sell it after its value appreciates, or you can rent it out (there will be additional income in the long run that can be used as collateral when the need arises).

(ii) Tax Deductions. The associated costs of owning and running a commercial space can provide tax deductions in the form of mortgage interest, property taxes and other items.

(iii) Freedom. As the owner, you have the freedom to overhaul your property as you see fit. This freedom is often overlooked and you will only realize it when you want that extra toilet or when you want to knock down some walls to give way for more space. Unless you own the property, you will have to run these ideas through with your landlord.



Cons of Owning an Office Space


(i) Location. 
You dream of working in the midst of the bustling city center where everything can be accessed, with the city’s biggest shopping mall within walking distance from your office, but guess what? You will have to throw in almost half of your startup capital just to be able to pay the down payment and you have to spend some more to pay for the ridiculous monthly parking fees.


(ii) Future Upkeep. 
You managed to secure a loan and finally obtained your own office. Congratulations! However, you have to relocate next month and you cannot find a tenant, let alone a buyer for at least a year. Unfortunately, you will still have to pay that monthly payment for the loan you took up in order to buy your office.

(iii) Continuous Maintenance. After 6 months, you found a suitable tenant for your office space. 2 months later, the water system breaks down, and a myriad of other issues suddenly arise and you realize that your tenant is 2 months behind on paying the rent. You will have no choice but to deal with it.

(iv) Dispute with Tenants. Your tenant is refusing to pay their rent, vacate, or simply just decided to stay indefinitely. Unfortunately you are at a clear disadvantage because there are only a handful of acts concerning these issues; the Distress action under the Distress Act 1951 and Eviction Order under the Specific Relief Act 1950. Before you can legally recover possession of your property from the tenant, you need to obtain a court order, which will be time consuming and costly.

Depending on the current and future necessity of your business, owning an office space may be a bit too much for some people, but if you’re willing to put in some time, effort and intelligently maneuver around with some risks, owning an office space in a prime up and coming area will eventually yield a handsome return. We can only see this trend going upwards in the next 10 years, considering the hiking price of property in various places around Malaysia.

On the other hand, leasing can also bring a lot of advantages if one knows how to anticipate and plan ahead. Let us take a look at the pros and cons of leasing or renting an office space:



Pros of Leasing or Renting an Office Space


(i) More Money.
Less money spent on your work space translates to more money can be allocated to other more important aspects of your business, be it hiring more staff or having more capital to jumpstart your thriving business venture.

(ii) More Time. You will not have to deal with the headache that comes with owning a property and you will have more time to deal with the headache of your business.

(iii) Location. Now you can work in that dream location you have always wanted without breaking your wallet. Paying for that two months deposit against having to secure a large sum of money via a bank loan is definitely more advantageous at the start of your long business career.



Cons of Leasing or Renting an Office Space


(i) Dealing with the Owner.
 You have to brace yourself with the owner cancelling the tenure of the contract unless you pay up the new non-negotiable jacked-up price of your monthly rent.


(ii) Missing out on a Profitable Equity.
 If you had bought the property in the first place, you would have been sitting on a very hot and probably very lucrative asset that you can either sell or rent to someone else. Instead, after 5 years of leasing you are being told to move out and find another place because you are now unable to afford the monthly rent.



Conclusion

Ultimately it all comes down to your priority. There’s no clear-cut answer to whether you should rent or buy your first office space. Before you finally decide, always think ahead and consider all options. You can always seek professional help and try to listen to every opinion you can get. You can save a lot of money and time by following news on latest market trends and keeping up to date on current property affairs.

Looking to buy or rent an office? Post your requirements here and we will do the search job for you!



(Written by: Muhd Hanafi, 9th May 2017)

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when your business is growing and have good cashflow, then it is best to buy.  Best to buy near LRT nowdays so that extra convenient for everyone. 

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When you start up a business whether big or small, I think it is prudent to rent a premises first to generate enough cash flow and profits. Once you have a good balance sheet and you can afford to purchase an office after a few years it is wise to own the office as an asset. This is more so if your business had expanded and renting large office or business spaces and constantly having to deal with increasing rentals every few years by the Landlord. You may also purchase the property on your private capacity or form a holding company to own the asset to lease it to your business on more a more consistent rental terms. This way the business can still move on and relocate without having to manage the real estate and subsequent tenants.        

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@davidwong Couldn't agree with you more. It's true, I think should rent first until cash flow is stable.

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@veron 

Cash is always king. Moreover when you want to expand your business initially.