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Dave Says: A solid track record

By Dave Ramsey

Syndicated Columnist

Dear Dave, 

How do you know when the time is right to buy a place and stop leasing? I’ve operated my own small business for three years, and in that time, I have leased the building that houses my company. Thanks for your help.

Jon 

Dear Jon, 

I’m a big fan of leasing the first few years after starting your own business. Now, it’s even better if you can work out of your home when just starting out. But I understand that depending on the type of business you’re running, that route’s not always possible. 

You should only buy a building when you have a really good idea exactly what your building needs will be, based on a solid track record. Growth in business is a good thing. But in some cases, you may want to hold off buying a building if you’re growing too rapidly. Don’t make the mistake of focusing too much on real estate, and not enough on generating revenue and managing your growth wisely. You’d also want to make sure you’re going to be in anything you buy for a while, because you don’t want to be stuck with a residual value—the remaining value of an asset after it has been fully depreciated. 

So, yeah. In the first three to five years of starting your business, it’s always a good idea to lease. After that, and once your company has a proven record of success, you can think about leasing with an option to buy, or—in the right situation—buying a building.

Debt-free, of course! 

—Dave