Rent Or Own

MrsMista · May 23, 2006

I want opinions from you guys who run a que joint. Those who don't can chime in too.

Do you rent your facility or do you own it? Also give me some of the advantages and disadvantages either way.

bbqjoe · May 23, 2006

I own mine.
Advantages:
Property values increase. If I had to close and sell right now, I would be able to pay off the note and still put something in pocket. Especially when you purchase used equipment to open with. Used equipment, such as stainless tables, sinks, ovens etc. aren't going to depreciate any further than they already have.

If I feel like changing something in or about the building, I don't have to ask permission from an owner.

Disadvantages:
You get all set up. People learn your location, and then your landlord decides to terminate the lease for any number of reasons.

You are not building any equity by renting. Just more money down the drain.

Need a loan for something? Banks are happier when you own your building rather than leasing one.

Just a few quick thoughts Mrs. !

thillin · May 23, 2006

I've never owned a business, so take it for what it's worth.

I'd rent with a 6mo -1yr lease. When things take off, then start looking at buying while I'm in business with an income. Might just be able to work out any kinks before purchasing a building.

Of course this is all relevant to property/rent prices in your area.

Maybe even talk it over with someone from the small business adnmin.

spicewine · May 23, 2006

Buy the property!! They are not making it anymore!! Even if you Bust, you can still lease the land to another business and still have something to show for it.

MrsMista · May 23, 2006

bbqjoe said:
...Used equipment, such as stainless tables, sinks, ovens etc. aren't going to depreciate any further than they already have.

If I feel like changing something in or about the building, I don't have to ask permission from an owner.

Are you still able to depreciate used equipment? Also when you change something do you find it difficult to determine the difference between capital improvement and deductible expense?

CharlieBeasley · May 23, 2006

Joe has two sets of advantages for owning My wife and I had a home interior business (Wife and me as hired back) When after 5 years of lease the leftover inventory was all we got out of it (tax laws suck for small business especially retail) The lease in a not so great location which went down over the 5 years was high enough we could have purchased a nicer location and built equity. We did this business out of pocket so the banks were not an issue but the cost of purchase was out as well. Hard lesson "Be very careful with your debt and buy the building"!!! Not BBQ but business is business.

Yakfishingfool · May 23, 2006

'bout ten years a go a local couple decided to go the Q joint and rented a spot around the corner from me. Put a lot fo time and money into the set up. Really nice. One day went by and saw they were gone. Evicted because the property had been increased in condition and th owners wanted to put an antique shop in. The Q was so-so, they are in a twon over now, but they lost like 85k with that activity. Scott

bbqjoe · May 23, 2006

MrsMista said:
Are you still able to depreciate used equipment? Also when you change something do you find it difficult to determine the difference between capital improvement and deductible expense?

I'm sure you can depreciate some. But what I'm saying is if you buy a stainless table used for $200 bucks instead of 5 or six hundred new, you know you'll always be able to sell that table for $200.
Some of the other stuff is best left to your tax man. That's why I pay him, to figure that stuff out.

Rockaway BeachBQ · May 23, 2006

I have never read anything that professed renting a restaraunt location being better than owning.

MrsMista · May 23, 2006

I just want as many pros and cons for either one to help may my decision more difficult.:shock:

bbqjoe · May 23, 2006

Seriously MRS, the amount you pay for rent is more than likely to be higher than what you're going to pay for a mortgage. Remember, the Land lord is using your rent money to make HIS land payment, and then tacking on some more for a profit.
The only inconvienience to owning, is that you will be responsible for all of your own repairs. Then again ever try to get a Landlord to fix something?

Owning, for whatever the reasons, IMO, is just hands down a no brainer.

MrsMista · May 23, 2006

bbqjoe said:
The only inconvienience to owning, is that you will be responsible for all of your own repairs. Then again ever try to get a Landlord to fix something?

Owning, for whatever the reasons, IMO, is just hands down a no brainer.

I'm inclined to agree that owning is better especially with the point you make about repairs. Fixing something that doesn't belong to me would be a waste.

My problem then would be the price of real estate in California. That's a whole nother issue:icon_sleepy

bbqjoe · May 23, 2006

MrsMista said:
I'm inclined to agree that owning is better especially with the point you make about repairs. Fixing something that doesn't belong to me would be a waste.

My problem then would be the price of real estate in California. That's a whole nother issue:icon_sleepy

That....I can't help you with.

MrsMista · May 23, 2006

bbqjoe said:
That....I can't help you with.

Think I'll have to fast that beast carefully with a whip and chair.

thirdeye · May 23, 2006

MrsMista,

I'm not a Q jont owner, but a business owner. Most owners I know are incorporated or have a LLC set up under their business name, but own their property, vehicles, equipment and building(s) personally, under another company name. That way you lease everything from yourself. When you buy an asset, eventually you will pay it off. By leasing to yourself, you can lease your asset back to yourself forever.

Visit with your local Small Business Development Center (usually state funded and free) or a CPA to check out options. There is no sense not taking advantage of the business and tax laws.

MrsMista · May 23, 2006

You guys always amaze me when you talk about something other than "Q"!!

rbsnwngs · May 23, 2006

well in my situation i do not have enough money to buy the building i will be leaseing in. i do how ever have a what they call a "right of first refusel" so when and if the landlord decides toi sell he has to come to me first.
Now if i had the money of course it is better to own for the reasons stated earlier in this thread. there are also other advantages to owning the building you will have your business in.
you can lease the space to another company you have created so you are paying youself rent.
you can use the equity in your property to open other locations.
The list goes on and on.

bbqjoe · May 23, 2006

I am not a financial wizard, but this buying and leasing it to yourself thing was frowned upon by my CPA. He said not to even bother with getting into this stuff. A lot of very wealthy, and important people also use this guy.
I just listen to what he says.

A couple a pennies

rbsnwngs · May 23, 2006

as Joe said check with your cpa financial advisors and anyone else you can who might have expierence with this. I know several people who have and are doing this very thing right now.

jgh1204 · May 23, 2006

One advantage to renting, the rent is 100% expensable.

When you own, you can depreciate your building, but of course not the land. If buying, try to put as much value to the building as possible.

When you are buying your equipment, you get to expense so much per year without having to depreciate. For 2005, you can expense up to $105,000.

A good CPA is worth the $$$.

My best advice, if you hire labor and must pay 941 and 940 taxes, do so weekly or at least put the money into a separate account. The IRS has NO SENSE OF HUMOR AT ALL ABOUT EMPLOYMENT TAXES.

Rent Or Own

Full Fledged Farker

bbqjoe

Guest

somebody shut me the fark up.

Babbling Farker

Full Fledged Farker

CharlieBeasley

Guest

Babbling Farker

bbqjoe

Guest

Full Fledged Farker

Full Fledged Farker

bbqjoe

Guest

Full Fledged Farker

bbqjoe

Guest

Full Fledged Farker

somebody shut me the fark up.

Full Fledged Farker

is Blowin Smoke!

bbqjoe

Guest

is Blowin Smoke!

Babbling Farker

Similar threads