Here's a secret that new retailers should understand: There's no requirement for you to purchase commercial real estate in order to operate your business. In fact, if you're just launching your business, then purchasing a property might not be in your best interest. What's probably in your best interest is to reach out to a real estate agent who specializes in retail commercial real estate that's available to be leased. Consider the reasons why retail commercial real estate for lease could set your business up for success:
Keep more revenue in house
When you're ramping up operations, it's imperative to keep as much money in-house as possible. You won't have extra funds to spend at first, and a mortgage could leave you financially over-leveraged. You can operate a lot more efficiently when you lease your retail business space, instead of buying the space.
No down payments required
When you purchase retail business space, you'll be asked to leave a down payment on the mortgage. In fact, you could be asked to leave up to 35% of the entire purchase price with the building owner. It's likely that you won't be able to afford up to 35% on a down payment. You can avoid this when you lease your business property.
No need to purchase insurance for a mortgage
Particularly when you finance your retail business property, you'll be required to purchase an insurance policy against your ability to make mortgage payments. The insurance policy ensures that the owner will be able to receive what's owed to them should something hamper your ability to make your payments. If you'd rather avoid spending additional money on an insurance policy, then consult with a real estate agent who specializes in retail commercial real estate. They'll steer you towards listings for lease, instead of showing you listings that require a purchase.
You can control your costs
Most of the time, you'll be able to forecast how much money you'd pay for your mortgage every month, but depending upon changes in interest rates, your payments could change. When you lease your retail space, your money won't be tied up in the ebbs and flows of U.S. interest rates.
Additionally, you'll know exactly how much you'll pay during the course of your lease contract term. This will allow you to control your costs and properly forecast your profit margins.
You can leave at the end of your lease
Is part of your plan to start in a small commercial space and expand later? Are you taking advantage of the low rental cost of a certain area of town with plans to move to a more upscale area? When you lease your space, you can leave at the end of your contract. Best of all, the same retail real estate agent who assisted you with finding your first location can easily find more for you to rent in the future!