First Leasing is like a loan. For a monthly payment much less than the cost of finding, designing, developing and constructing you get the use of someone else’s facility thereby conserving your capital for other uses to grow your business. How you handle your Business Location can generate Working Capital. Who doesn’t need more of that.
Leasing doesn’t stop helping your Business there. Lease payments are 100% expensed. The cost of the space you occupy is tax deductible.
Additionally leasing space allows for quick changes in size, layout, etc… as your Business grows. Work around solutions typically cost money and when they involve commercial real estate they cost MONEY.
For the Math People let’s look at an old idea made new again by the Recession.
Economic Value=Project Earnings-(Required Return X Project Investment)
An example being ABC Company wants to lease new space from XYZ LLC and leave it’s old location in a remodeled mill. Old rent was $1,000.00/month and new rent is $1,200.00/month. ABC Company tries to obtain 20% return on all its sales, investments, etc…
Required Return (20%) and Project Investment ($200/month) means Project Earnings must be $1000/month for the move to have Economic Value.
Will the new location generate $1,000/month from:
- New construction vs old saves utility costs for heating & cooling?
- New lease includes a cost previously not included in the rent? (water/sewer, storm water, taxes)
- New location has space for showroom, displays, inside sales counter, more inventory, more parking, image improvement to get clients to site to see your products, people, etc… visibility for your Business
For Help In Reviewing These Factors and More Click For Free Leasing Guide