For the previous post, you have read about strata title and the differences between condominium and strata-titled office. In this article, we would like to highlight some of the key factors that you should consider before making the decision to buy or lease your next office space or strata-titled office. Whatever your decision is, make sure you carefully weigh out pros and cons of each choice before finalizing your decision. So, without further ado, let’s have a look at them below.
Pros of buying strata-titled office
1. Economical gain with the increased property value
Buying strata-titled office could prove to be a great investment strategy as investors can rent out a portion or the whole office space to another business, bringing in additional revenue stream. Owning commercial real estate or strata-titled office also allows investors to benefit from capital appreciation which is the increasing value of your property over a period of time. The rate of the appreciation relies on the inflation rate, local supply and demand conditions, interest rates and other factors. According to one report from Pointer, strata-titled office could provide an attractive ROI (Return on investment) of approximately 10% annually which is 2% more than condominiums.
2. Control over the property
When you buy the property, you have the authority to make changes or modify the appearance of your property (within the confines of zoning restrictions) meaning that you’re not required to seek for the permission from your landlord in case you would like to reconfigure the space.
When purchasing strata-titled office for your business, you can stay in your preferred location for as long as you want compared to renting it. Your business will also have fixed rather than fluctuating costs which means there are no random increases in your monthly loan payment caused by the unpredictability of your monthly cash flow.
Cons of buying strata-titled office
1. Property Maintenance
As an owner, you are responsible for your own property maintenance which is time-consuming and requires lots of commitment and efforts in order to preserve your property in good condition so that it can potentially be sold with a higher price than when you originally bought it. It’s always a good idea to take this into consideration whether you would like to take on this task yourself or hire a property manager which will also cost you some portion of your budget.
2. Huge financial commitment
When you decide to buy a new office space for your business, you will have to make a substantial down-payment that can tie up a large portion of your company budget. Another thing is that since you own the place, you are also responsible for the renovation fee as well.
3. Lack of flexibility
Flexibility issue can arise when buying a new office space. Let’s say your business is successful and you need to expand, you will be forced to lease or buy a new office space since small office spaces carry the risk of being inadequate when your business starts to grow. Then you would have to sell the property, which by itself is a time-consuming and cost-oriented process.
Pros of leasing strata-titled office
1. No maintenance responsibilities
Most office space leases leave the responsibility of maintaining the building to the landlord. Roof repairs, air conditioner and heating unit repairs, as well as minor maintenance will all be taken care of for you when you lease so that you are able to stay focused on your business goals without the added responsibilities of facility maintenance.
2. Free Up Working Capital
With your money not tied up in real estate, your business can respond to opportunities in the market. Also, your ability to borrow funds will not be as limited as with buying office space.
3. More time to focus on your business
Any type of ownership comes with added responsibility on top of your packed schedule as business owner. A leasing option will provide you the time to concentrate solely on running your business.
Cons of leasing strata-titled office
1. Cost variability Upon Renewal
One of the biggest risks involving leasing an office space is that there will be potential increase in rent when the leasing agreement comes to an end. This can be problematic for your business since it requires you to renew your lease at a higher rate which could potentially force you to move your business to a different location or downsize if you’re not willing to pay asking price.
2. Any improvement you’ve made will not benefit you
This can happen when you would like to upgrade the space or make it look better. If you do eventually leave your space, remember that any improvements that you’ve made to the space will directly benefit the landlord. If the property is yours, then you shouldn’t have to worry about that.