User talk:Ebony Monnier
From WikiGenetics
Many businesses reach a point in which it would be beneficial for them to purchase Office Space For Rent Makati.There are a few common factors that should be taken into consideration when buying office space. We will take a look at some of the pros and cons to purchasing.
Cash Outlay - Typically if you are preparing to purchase an office, you can expect to make a down payment of between 10% and 25% of the purchase price, based upon on the lender and your credit. When you lease office space you won’t need to put down nearly as much. With good credit, the typical outlay is the first and last months rent which is only about 10% to 15% of the cash outlay recommended when purchasing office space.
Opportunity Cost – With the large outlay of cash required to purchase office space, the opportunity cost of that money needs to be taken into consideration. What return would you expect to receive on that money compared to the return you would expect to receive if you invested the money back into your business or into other investments?
Fixed vs. Variable Cost – When you buy office space, you have a excellent idea what your costs will be over the long term. This is particularly true if you have a long term fixed rate mortgage. If you lease office space, the market will dictate what you will end up paying for rent over the long run.
Growth Considerations – The growth phase of your business should be a main consideration in making the lease vs. buy decision. If your company is relatively new and/or in a high growth mode, leasing would allow more flexibility and fewer constraints to that growth. On the other hand, if your company is mature and stable, buying office space is great way to meet your future office space needs.
Property Management – You’ve heard the expression, time is money. If you own office space, it needs to be managed. You can either hire out the function or do it yourself. Many businesses with long term growth plans buy more office space than they require and rent out the expansion space. All the more need for good property management.
Appreciation – One of the primary goals of buying office space is to produce long term increase in value through market appreciation. A good idea in a healthy market and usually effective over the long term. It is usually a good way to add to your retirement fund, but keep in mind that recent commercial real estate cycles have come in 10 year periods.
Tax Factors – Lease payments are usually fully deductible, but many costs of owning office space must be written off over longer periods of time of up to 39 years. The good information if you buy is that you get to take depreciation on the improvement portion of the property and can usually deduct all of your interest payments. When considering the tax factors it is always very important to seek the advice of your attorney and tax professional about the legal and financial considerations to owning office space.
Cash Flow Analysis – The devils in the details. In order to really know the financial aspect of purchasing office space, you need to prepare a detailed comparative net present value cash flow analysis which takes into consideration your estimations on the future including holding period, anticipated appreciation vs. rental increase, interest rates, and cost of expenses increases. It is a good idea to do three different analyses, optimistic, realistic and pessimistic, to helpdetermine your margin of error.
