It depends on your point of view and the reason you want the office space. Today you will be hearing the best reasons to build an office space instead of renting from someone else.
1) A Must-Move Clause
Someone else calls the shots when you rent the space. You have to abide by their rules or get out. However, if you build your space, then you have essentially bought the place. Space is yours to do with what you want.
No one can lease the space you built without your approval. In other words, you do not have to worry about a must-move clause causing you to move out. Renting the office space means you have to move at the end of the lease unless you sign a new one.
Building and buying your space means you are there unless you have a reason to move locations.
2) Investing In the Long-Term
Renting is only a short-term investment. Anyone can move out on a whim. Building and buying the space means you have more of a long-term investment with space. Space will pay for itself the longer you are there. This is why it can be better to build your own office and design it as you wish. According to Vadim Podrobinok, a licensed architect in California, notes that when it comes to designing your business, “is stressful enough and through the power of design I believe those stress levels can be reduced,” in regards to the benefits of designing your business’s layout.
Other benefits that come from designing your own space include gaining more equity if space is yours. Your space will be worth more because it is yours. Now, if you decide to lease some of your space out to someone else, that could mean more money for your business. Some owners will rent out the space they do not use. That monthly rent will increase the investment value of the property.
3) Cost Segregation Depreciation
There is a tax strategy known as “segregation depreciation“. You may or may not have heard of that before. It depends on the business circles you travel in. Say, for example, that you paid more than $1 million on the property you bought or built in the last year. You can take advantage of that tax deduction.
4) 1031 Tax-Deferred Exchange
How many of you are familiar with the 1031 Tax-Deferred Tax Exchange? You better become familiar with it if you are going to build an office space. According to one CEO, you could qualify for that tax referral.
All you do is defer the capital gains on the office space property to a later date or possibly indefinitely. This works out well if you decide you want to sell the space before you retire. That way you can live off the money without having to pay much in taxes.
The only thing I will suggest is for you to speak with an asset manager or money manager who specializes in that type of thing. That way he or she can advise you on how to proceed with setting that up. This is your tax return we are talking about, You do need to be careful on how to proceed with your deductions.
Say that you have built more office space than you were intending. You could rent out space you do not need. Charge a fair rent price. You can use the rental income to help pay for the mortgage, which does get expensive depending on where you build.
You should avoid pocketing the rental income and using it as bonus money. It is not meant for those purposes. You will have the final say in what happens with space. It is better to be the rentee, not the renter.
As you can see, there are at least five benefits to buying or building office space as opposed to renting. You will have more control. You will be the master of your destiny.