Buying vs Renting brings up the question: Why buy if you can rent? Well, it depends on the purpose of your venture. There are occasions where buying is the better choice, but most of the time – renting is the optimal decision.
The Law of Diminishing Returns
This basically answers the buying vs renting debate. According to the basic dictionary definition of this “law”, it is a point at which the level of profits or benefits gained is less than the amount of money or energy invested. Essentially, if you’re only going to use an item a few times, and your personal gain from it does not reach the level of money you spent buying it, then you’re at a loss.
For example, you bought a wedding gown and will obviously only use it on your wedding day. Unless you’re getting married again any time soon and will be using the same dress, then in all accounts you will not meet the amount of money you’ve invested on that one day. The same principle is used on the tables, chairs, utensils, and other fixtures that are used at weddings. Since these things will only be used for one specific event, renting is always the best option.
Buying vs Renting for Your Business
The buying vs renting debate is not just isolated with personal decisions. Businesses also encounter this internal debate. Sometimes, investment in equipment goes beyond the law of diminishing returns. Businesses also have to account for cash flow, inventory management, and disposing of obsolete equipment just to name a few.
As a business, you have to realize that in order to maintain healthy cash flow you need to minimize large purchases. Essentially, huge purchases are a big blow to their cash flow. So, there are circumstances that would favor renting rather than buying. A good example is office space. Majority of businesses rent office space, instead of buying it. It just makes more sense, especially for small to medium-sized businesses.
Other Scenarios of Buying vs Renting
There are other scenarios that call on the buying vs selling debate. Renting is becoming such a big thing because it’s a hassle-free option for consumers and a cash cow for rental businesses.
Farming businesses can choose to rent fruit-bearing trees and benefit from the harvest income, without the land tax costs and the actual farming among other things.
Parking space, store shelf space, even warehouse space is best rented out. It just makes total sense to do so due to the high costs of maintenance and other overhead expenses that these normally incur. Buying vs renting – most of the time, renting is just the best option.
The iRentMo app gives you the opportunity to start your own renting business. It also gives you the ability to rent whatever you need. You can download the app here.