Is it Better to Buy or Lease Office Space for Your Cleaning Business?

Jean Hanson

Whether you're just starting out, or been in business awhile, the day will come when you need to decide whether to run your business from home, buy or lease your office space.

The first option is to run your business from home. A home-based business offers the advantage of allowing you to keep your overhead low until you have established some accounts and attracted a customer base. It also allows you to retain more profit until you can build up your cash reserves.

When the time comes to expand your cleaning business into a commercial office, your main consideration should be finding a space that will allow you to operate cost-effectively and accommodate your growing business. You will need office space for your desks and office equipment, a place to interview and train prospective employees, and storage space for equipment and supplies.

Here are some points to consider:

Leasing:

Tax-deductible. The amount you pay for leasing is fully tax-deductible because it is a business expense.  When   you are first starting out in business, you need all the tax breaks you can get.

Maintenance costs are extra. You won't have to worry about maintaining the lawn and parking lot, but you will     have to pay for the expenses. Most leases are called a "triple net" lease, which means your landlord will pass on taxes and maintenance costs. It is usually invoiced separately from your monthly lease payment. In addition, you'll be responsible for utilities such as heat, water and electricity.

Terms of the lease. Typically, the longer the term of the lease, the lower the monthly cost. If you feel the spacewill accommodate the growth of your business over the next five years, you should be able to save on the monthly payment. If you feel you'll need to expand before then, consider signing a shorter term lease of perhaps two years.

Buying:

Tax-deductible. When you buy commercial property, you'll be making loan payments to your lender. Unlike leasing, the full payment is not tax deductible. However, the building will be depreciated over time so check with your accountant on how much you'll be able to depreciate as a business expense each year.

Your property is an investment. Buying property is considered and investment. Keep in mind that if you buy an existing building you may need to invest more money into modifications to fit your business needs. If you build on land purchased, you can design the building to suit your needs.

Additional business entity. If you buy property, you'll want to start an LLC, which is a separate business entity from your cleaning business. This means doing two sets of books and two separate tax returns. Consult with your accountant for his/her recommendations.

Leasing is a much simpler way to go when you feel it is time to move into a commercial office space. But when you know you'll stay in a location for 10 years or more, buying property could be a good investment. Consider buying if you think you can get the property at a below-market price. In that case, the invested equity and tax benefits can make owning more advantageous than leasing.

Before making a decision on what to do in regards to business office space for sale or for lease, you should have your accountant or real estate broker do an analysis of whether it is more advantageous to buy or lease, and you should also research the tax advantages of leasing over buying.

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Jean Hanson helps owners of commercial cleaning companies build a more profitable and successful cleaning business through her online community at TheJanitorialStore.com. Jean is also the host of the popular Web TV show CleaningBiz.tv and author of the newsletter Trash Talk - sign up today!

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Copyright TheJanitorialStore.com. All Rights Reserved.
Jean Hanson helps owners of small cleaning companies build a more profitable and successful cleaning business through her online community at TheJanitorialStore.com. Read inspirational cleaning success stories at http://www.cleaning-success.com, and sign up for weekly cleaning tips at http://www.TheJanitorialStore.com.