Buying vs Leasing a Retail Property

Buying vs Leasing

The question of whether to buy or lease a property for your cafe largely depends on your business plan, financial circumstances and mindset.

There are a lot of advantages to owning your own property but in many cases, it may be more practical and strategic to enter into a well structured lease.

Advantages of Buying

  • Overheads: Potentially lower monthly operating costs from bank loan repayments compared to rental expenses
  • Rental Increase: No unexpected increases in rental rates when it comes to renewing the lease
  • Lease Renewal: No unexpected need to move out if the landlord chooses not to renew the lease
  • Sunk Costs: Lower risk of wasted renovation costs as¬†improvements to the premises will contribute towards an enhancement of the property’s value

Advantages of Leasing

  • Required Capital: Lower initial capital investment for the property to provide more funds for the business
  • Maintenance: Lower cost of building maintenance where the landlord normally has to pay for these repairs
  • Flexible: Flexibility to move and change locations more easily if there are unforeseen issues with the first property

For first time operators, it would probably be wise to lease a property first and focus the company’s limited resources on building the business, which is in operating a cafe and not real estate investment.

For experienced cafe owners who would like to expand their business after starting in a small way, buying may be worth considering as it does offer greater benefits in the medium to long run.

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