Starting a childcare centre is a rewarding venture, but one of the critical decisions you’ll face is whether to buy or lease the property for your business. Each option comes with its own set of advantages and challenges. In this article, we will explore the pros and cons of both leasing and buying to help you make an informed decision that aligns with your goals and financial capabilities.
Leasing for Your Childcare Centre
Lower Startup Costs – Leasing a property for your childcare centre generally involves lower upfront costs since you don’t have to worry about the downpayment for the building.
Operating Costs – As a tenant, you’ll be responsible for paying the landlord’s property tax, insurance, and maintenance costs. Additionally, you may be required to cover the costs of any necessary renovations.
Lack of Ownership – One significant drawback of leasing is that you don’t own the building. This means you won’t accumulate any equity in the property, and you’ll be at the mercy of lease renewals.
Dependency on Landlord – Your business’s fate is tied to the landlord’s decisions. You may face challenges if the landlord decides not to renew your lease or if there are increases in the TMI costs (property tax, property Insurance, and common area maintenance).
Maintenance Responsibilities – While the landlord may cover certain maintenance costs for the building exteriors, you are likely to be responsible for all interior maintenance, such as HVAC repairs, plumbing and everything inside the building.
Buying a Location for Your Childcare Centre
Ownership Benefits – Buying a property requires a higher initial investment, typically a downpayment of 30% to 35% for commercial properties. However, the eventual ownership of the building and the ability to sell the business at the end of your childcare journey can be significantly advantageous.
Control and Flexibility – Ownership grants you control over the property, allowing you to make decisions without depending on a landlord. You can even choose to rent the location to other daycare providers if you wish.
Investment in Equity – When you own the building, any payments you make contribute to your equity, and any improvements or renovations add value to your property.
Stability and Predictability – Unlike leasing, where lease renewals are uncertain, owning a property provides stability and predictability for the long term.
Financial Considerations – While interest rates and HST payments for commercial buildings are factors to consider, the potential financial benefits of ownership, including tax advantages, should be taken into account.
Maintenance Responsibilities – As the owner of the property, you will be responsible for everything, from inside to the outside.
In conclusion, the decision to buy or lease a property for your childcare centre hinges on various factors, with financial capability playing a significant role. If you have the financial means for the downpayment, purchasing a property offers long-term benefits, including ownership, equity, and stability. On the other hand, leasing may be a more feasible option for those with limited upfront capital, despite the potential uncertainties associated with it. Ultimately, carefully weigh the pros and cons based on your specific circumstances to determine the most suitable path for your childcare business.