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Rent or Buy? Considerations for Your Automotive Repair Shop
Rent or Buy? Considerations for Your Automotive Repair Shop
One size does not fit all when it comes to renting or owning the building for your shop, but there are quite a few considerations to keep in mind before you make a decision. Just like homeownership, timing, condition, and location are everything for choosing to when to rent or buy.
Going Rural?
If you’re considering a location away from the main roads in town or a rural location that will require customers to drive out of their way to get to you, will the savings on that location allow for monthly marketing costs? Many shop owners fail to consider the value of “drive by” traffic to their shop; they assume that word of mouth referrals will fill up their repair bays. While that assumption may be true for a shop that’s been open for decades, it won’t work for a brand new shop or a shop that’s moving away from the hustle and bustle of town.
Sometimes renting (and buying) in rural areas is more affordable for startups, but if you can structure a business loan with the right terms to leave more money for marketing, do it. Even if you don’t use all of your marketing budget, it’s better to have access to it if customers aren’t finding your shop through referrals.
Consider The Future
What are the plans for your shop if it takes off and becomes one of the best-known shops in town? While you can sell your shop regardless if you own or rent the building, owning the land and building may provide a larger profit in the long run. Be sure to consider the market outlook for commercial real estate in your metro area before you sign a lease.
If you’re going to lease a building, create a plan for moving your shop at the end of the term in case the owner doesn’t offer to renew your lease. Do you live in a town with a lot of shop options? Is land affordable in your area and do you have adequate credit for a business loan? Don’t sign a lease without considering the “what’s next” phase. When moving a repair shop, there’s also the cost of moving equipment to consider. If you’re financing or leasing your equipment, ask your finance or leasing company about insurance requirements, restrictions on moving equipment, and assistance programs for moving.
Plan for Growth
Growing a business is an exciting time; it means that you’ve done everything right and your business is going well. For successful shop owners, growth doesn’t come as a surprise, they plan for it. If you’re starting out with a shop that has one bay, how can you add two more bays to your location?
Do your research on local variances, building codes and restrictions. If necessary, ask a commercial real estate expert or attorney for assistance. Even if the location has plenty of land to expand, there may be restrictions on the type of building you can add to an existing location. If you’re leasing a shop, a metal building with an A-frame carport roof can easily serve as an additional garage building that can be moved at a later date.
Check to make sure it complies with local building and zoning codes so that you don’t eat up all of your profits with fines and fees for bringing the building into compliance later.
Plan for Weather Conditions
While many shop owners assume their technicians will expect less-than-ideal temperatures in the shop at the height of summer and winter, the industry is changing. High-quality dealerships offer air-conditioned bays in the summer and heated bays in the winter. The technician shortage isn’t showing any signs of a slow down; your team will be happier and more likely to stay with your shop if you provide a comfortable working environment.
If you’re going to lease a building, negotiate AC, heating, insulation, and ventilation upgrades before you sign on the dotted line. If you’re building your own shop, be sure to budget for adequate heating, cooling, and ventilation, especially when the bay doors will be opening and closing all day long.
Consider Tax Breaks
If you’re still in the cost analysis phase, don’t forget to consider tax breaks. There are federal tax breaks for building a garage with sustainable materials and local tax breaks for new businesses that build in certain areas of town. Consult with an experienced local tax advisor who serves other area businesses; they’re more likely to know the latest information and expiration dates.
In conclusion, don’t assume that renting or buying is better for your shop until you’ve done an adequate comparison of the two options. There are many factors to consider besides the average monthly payment; future options, future moving costs, growth and shop expansion, employee satisfaction, and visibility in the marketplace. Be sure to consider all of them before you sign a lease, a business loan, or both.
Steven Torres, Manager, MetalCarports.com
https://www.metalcarports.com/
When aesthetics are a concern, the right A-frame metal garage will outlive a wood-framed structure and deliver a shorter construction time than traditional building.
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