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Commercial Real Estate in Montreal

Small business owners or entrepreneurs are always puzzled with the question of whether it’s better to continue leasing or to finally buy their commercial real estate in Montreal. While every business is different, there are some common factors that should be considered.

Factors such as space and financial needs, as well as the image of the business and its growth. Moreover, interest rates, the economy in general, and changing real estate values further complicate the matter.

Differences in Leasing vs Owning

Deciding whether to lease or own commercial real estate in Montreal can become very complex. The points below can help you acquire a clearer idea. For the majority of small business owners, however, the whole debate ultimately centres around money and long term plans.

Cash Outlay

If you plan to purchase commercial space, expect to lay down between 10% and 20% of the purchase price, depending on your credit and the lender. When you lease commercial real estate, you won't need to make as large a down payment. The typical outlay is the first and last month’s rent, which comes to about 10% to 15% of the cash outlay required when purchasing commercial space.

Opportunity Costs

With such a large outlay of capital required to purchase commercial real estate, the opportunity cost of that capital needs to be closely looked at. What kind of return would you expect to receive on that amount of money, compared to the return you would expect to receive if you invested it back into your business?

Fixed vs. Variable Costs

When you purchase Montreal commercial real estate, you need to have a good idea of your costs over the long term, especially if you have a long term, fixed-rate mortgage. If you decide to lease, the market will dictate what you will end up paying in rent over the long term.

Business Growth Considerations

Owning commercial real estate can be a wrong strategy for new businesses that have big expansion plans or strong growth potential. Leasing would provide greater flexibility and fewer constraints to that growth. However, if your business is well established, buying commercial real estate is great way of ensuring your future space needs.

Analysis of Cash Flow

To fully understand the financial aspects of purchasing commercial real estate in Montreal, you need a detailed comparative net present value cash flow analysis. This type of analysis takes into consideration your predictions on the future including holding period, anticipated appreciation vs. rental increase, interest rates, and cost of expenses increases.

Getting Commercial Real Estate Advice

The next best step in this process is heeding the advice of commercial real estate professionals. They can not only significantly improve the accuracy of any analysis, but simplify the decision-making process as well as. Many of the factors invoved in leasing vs. buying commercial real estate can only be decided by you. But having commercial space expertise is important and will ensure are making the best possible decision for your business.