SPECIAL FOCUS
PROS & CONS
CONSIDER THIS Should you own or rent? Each has its own benefits — and drawbacks. OWNERSHIP
Setting Up Shop When it comes to choosing a location, there are many factors to consider, and many resources to help
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By Jeanine Nistler
arrick Saboe knew his Floor to Ceiling store was hard for people to find. Situated at 8075 Sterling Drive, in an industrial park on the outskirts of St. Joseph, the business was not readily visible to people driving on nearby thoroughfares. Customers needed detailed instructions, GPS, or a map to get there. So, Saboe and his wife and co-owner Danielle decided to build a new showroom/ office/warehouse at 942 21st Ave. NE, which is much closer to the heavily traveled Stearns County Road 75. “It’s nice to be in this location,” Saboe said. “We’re so glad that this came together with this property.” Theirs is a story of location, location, location, which is more than a real estate adage. It’s an incredibly important element of succeeding in business. Whether you want to relocate an existing business or are starting
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from nothing, experts recommend you: Consider the pros and cons of leasing vs. owning. Review zoning and land use ordinances for the area in which you wish to locate. Review appropriate township, city, or county development plans. Share your business plan with a commercial real estate professional and a banker. Be realistic about the capital you have and the size of loan you will need. Start early — whether you are planning to rent, buy, or build. Securing leases or purchase agreements, lining up permits, and getting financing generally take longer than anticipated. The same is true of construction. If you’re dreaming of opening or relocating a business, consider these local professionals’ thoughts on how they can assist business owners looking to build, buy, or lease:
Commercial real estate generally holds its value, which is good news for the day you want to sell. With each mortgage payment, you’ll build equity. And those payments may be fixed, as opposed to rent that can go up every time the lease is revisited. As owner, you may be able to deduct interest and annual depreciation on your property tax returns. If your space is larger than you need, you can rent to one or more businesses and earn rental income. On the downside, you likely will need a sizable down payment and plenty of money for renovations. Ownership reduces your flexibility to easily move to a different location if your needs change – and all the responsibility for the building falls to you.
LEASING SPACE You’ll need less upfront cash if you lease because you don’t need to make a down payment. Your responsibility is limited. You can call the owner or property manager if there’s a problem with the facility. Flexibility abounds. It’s easier to not renew a lease than it is to handle a 30-year loan or sell a property. You may be able to see a tax benefit by deducting rent payments and other expenses. You won’t build equity. You will need permission from the owner to make improvements – and the changes you make will stay behind if you move. As a tenant, you don’t have an opportunity to earn money by renting space to others.