Lease or Buy? Your Business Property Decision In Adelaide Lease or Buy- Your Business Property Decision In A | 页面 14

 Upfront spending: Typically, you will have to make a down payment of
10% to 40% of the property's value. You'll also have to pay for closing
costs and due diligence fees. For example, on a $1 million property, you
can expect to pay anywhere from $100,000 to $400,000 out of pocket for
the down payment and other fees.
 Difficulty qualifying for financing: You may have trouble qualifying for
a commercial real estate loan with a reasonable interest rate if you or
your business is unbankable. While the best commercial real estate loans
can have interest rates as low as 4% or 5%, loans made by hard money
lenders can have rates of 10% or more. In this case, it may be more cost-
effective to lease. In times of economic recession, it will be more difficult
to obtain financing, regardless of your creditworthiness.
 Prepayment penalties: Many commercial real estate loans come with
hefty prepayment fees or other penalties, in the form of yield
maintenance or defeasance, if you prepay the loan balance.
 Liabilities: You are responsible if someone is hurt on your property,
which means you'll have to pay for a liability insurance policy to protect
yourself from lawsuits. If you rent out part of the property, you are
subject to property manager liability, which will require additional
insurance. You also will have to pay for upkeep and repairs. In addition,
many loans may require a personal guarantee, which makes you
personally liable to repay the loan if your business cannot.
 Capital loss: There is always the chance that your property's value will
decline and that you might take a capital loss if you decide to sell.
 Loss of liquidity: Your money is tied up in the property, and to recover
it, you'll have to sell or do a partial cash-out refinance. What's more, the
money tied up in the property could have been used for other
opportunities had you leased instead.
VII.
Pros and Cons of Leasing Commercial Real Estate Adelaide
Commercial leases typically run from three to 10 years. You'll get use of the
property during the lease, subject to any restrictions built into the lease
agreement.