Are you interested in leasing? If you are, then you’ve come to the right place. At Lease Dash, we can provide you with the needed information to help you make an informed decision.
What is leasing? Leasing is defined as the contract between the lessor/owner and the lessee/user of a certain property. For instance, when you lease business property, the owner will receive financial compensation in return to the rights vested on the lessee for using the property.
Lease arrangements are of different types, and if you are a business owner, you have to make sure that you’re making the right decision. Just in case it is not feasible for you to put up your own business space, leasing is the best option. By choosing this alternative, you can use business capital for other needs such as equipment and inventory. Did you know that most small businesses lease their storefronts?
Knowing then good and bad points of leasing are vital, so you can make an informed choice. There are certain factors to consider which includes the following:
- Operating requirements vary among businesses, and if you are confident that there is going to be a great change in the coming years, leasing is an excellent option; you don’t have to worry about moving to another location
- Capital – through leasing, you can free up a portion of the capital and use it for the business operations like equipment, production, payroll, and advertising; leasing is an ideal option for businesses with limited cash or capital
- Flexibility – seasonal businesses can benefit from leasing because they can spread out the leases over a certain period; hence, you can adjust to the variations in cash flow without difficulty
- Resale value – if you have plans of re-selling the business in the future, leasing may not be a good choice; some business owners are confident that their businesses have a long term potential, and so purchasing property is a better choice
- Tax benefits on the part of the property owners – lessees can’t avail of these tax benefits, along with tax credits; therefore, you have to weigh things thoroughly before making the decision
- Equipment maintenance stipulations – stipulations regarding maintenance or upgrading of equipment varies among lease agreements; the increased flexibility given to lessees is an added advantage if you want to make an upgrade
Types of Property Leases
Knowing the different types of leases is the best way to make the right choice. Below are the different types:
This is common among office buildings that house multi-tenants. Aside from the lease payment, a lump sum is also paid for supplementary services; the property owner can provide services like maintenance, security, janitorial, and utilities.
A gross amount which can include sales tax, is paid to the owner of the property; in this arrangement, the lessee shoulders the utilities while the landlord is responsible for maintenance, insurance, and taxes. Under this type, business owners can choose between the flat and step lease.
The lessee will need to pay the base rent, along with additional sum to cover property taxes; the percentage of occupied space is determined and this will serve as basis when paying the property tax
The lessee has to pay the base rent, plus a 10-12% gross revenue; the percentage in the gross revenue may be given quarterly, semi-annually, or annually, depending on the agreements with the property owner
Regardless of type of lease that you choose, you have to make sure that you read the agreement carefully. Never sign a lease contract without first understanding its scope, terms, and other aspects. Read the fine print and shop around at great locations. There is no point in leasing property if the location is not accessible to your targeted market.
The lease agreement covers different elements. It is not enough that you know the different types of leases and the basic considerations. You also need to look into other elements such as the acceptability of the contract, the willingness of the landlord to make negotiations, etc.
The leasehold improvements should be clarified. For instance, you have to determine if the property owner will shoulder the cost for improvement such as electrical wiring, carpeting, plumbing, ceiling tiles, security systems, and many others. Another thing is the length of the lease. How long do you plan to lease out the property? You can choose between a short term and long term lease, and your decision should reflect that of the business goals. You also have the option to choose between existing buildings and planned ones.
At Lease Dash, you can find all the information you need to make an informed decision. There are many lease agreements that you can choose from, and we can help you especially if this is your first time to lease!
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