Money Matters

Your Credit Union Newsletter

Buy Your Office Or Lease?


To characterize the last year as challenging is an understatement. But, despite the turmoil, it did present some rare silver linings. One was an oversupply of office space which persists into 2021, meaning more bargaining power for both renters and buyers. But should you lease or buy?

If you do decide to buy, now is a great time, especially if you have contract value, which you can use as a down payment at the Credit Union. Our business consultants can walk you through all the benefits of owning. Plus office purchase prices are down versus a year ago, and interest rates are still low—always an incentive to purchase real estate. Leasing can have its benefits too (see table below) – especially with more favorable rental prices and terms due to excess office space during the pandemic. This could be welcome news if you’re a newer agent without access to a purchase deposit (typically 20%).

Here is a more detailed snapshot of some of the benefits associated with each option.

Stable costs. Having a commercial mortgage can lock in your long-term costs for predictable cash flow.Prime Property. Leasing office space option may provide more flexibility for an agent to rent in a high-visibility location affordably.
More tax deductions. Ownership can provide you with many valuable tax deductions, including mortgage interest, property taxes, and depreciation.Write off costs. Monthly lease payments are typically tax-deductible.
Additional income. Owning your office means you can rent out extra office space, for another source of income.Ability To Borrow. Your ability to borrow funds may be less limited with leasing than buying – for example no large down-payment.
Build equity. The long-term trend for commercial real estate is normally appreciation of the asset.  You are left with a property you can eventually sell at a profit.Less administration. Ownership comes with added responsibility.  A leasing option affords the time to focus solely on running and growing your agency.
Continuity. By owning versus renting, you are guaranteed that you can remain in your space for the long-term to develop your local market.Growth flexibility. Leasing gives you greater flexibility to adjust your occupancy costs and space needs to a level that fits the changing size of your agency.
Greater operational latitude. You’ll have more say over how you use or modify your office space.Free up working capital. With less capital tied up in real estate, you may be able to respond to other opportunities in the market more easily.

Whatever your agency’s circumstances and goals, a great first step in your “Buy vs. Lease” decision is ALWAYS to speak to your Credit Union—specifically one of our business consultants. We will work with you and take you through all your best options. And in the process, we’ll help you avoid the temptation to resort to a gut reaction or an emotion-based decision—these all too often come back to bite.

As with all investments, your unique circumstances will dictate how best to proceed — whether owning or renting — and what approach provides the best ROI for your agency. Your Credit Union business consultants will be happy to visit with you or virtually to help you make the right decision. And, remember—because they work for Farmers, their only job is to help you succeed.

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