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.