Lease VS Own?
Occupancy Costs
Occupancy costs are one of the largest operating expenses for businesses. Buying a building for your business allows you to secure these costs and avoid the instability that comes with rent increases and moving.
Some factors to consider when comparing the two options:
- Owning costs more up front, but typically costs much less over time.
- Being your own landlord gives your business a permanent home and offers stability.
- The low down payment required with SBA 504 financing allows you to keep working capital to put back into your business.
- Mortgage payments are often lower than or similar to lease payments.
- Owning your building allows you to build equity and benefit from the building’s appreciation over time.
- Owning can give you the option to lease any extra space your business is not occupying, offsetting your mortgage payments and occupancy costs.
- The equity you build from owning can provide security in retirement.
- There are tax advantages to owning.
See Your Options Side-by-side
If you’d like a custom lease vs. own comparison to see your options side-by-side
The following example comparison is based on a 10,000 square foot building:
OWN | LEASE | ||
---|---|---|---|
Purchase Price | $2,000,000 | Monthly Lease Payment | $20,000 |
Renovations | $0 | ||
Other Costs | $0 | ||
Total Project Cost | $2,000,000 | ||
Property Square Footage | 10,000 | Property Square Footage | 10,000 |
Total Price Per Sq. Ft. | $200 | Total Price Per Sq. Ft. | $2.00 |
OWN | |
---|---|
Purchase Price | $2,000,000 |
Renovations | $0 |
Other Costs | $0 |
Total Project Cost | $2,000,000 |
Property Square Footage | 10,000 |
Total Price Per Sq. Ft. | $200 |
LEASE | |
Monthly Lease Payment | $20,000 |
Property Square Footage | 10,000 |
Total Price Per Sq. Ft. | $2.00 |
UP FRONT COSTS
OWN | LEASE | ||
---|---|---|---|
Down Payment (10%) | $2,000,000 | Prepaid Rent (2 Months Rent) | $40,000 |
Estimated Bank Fees (1% of Loan Amount) | $0 | Prepaid Rent (2 Months Rent) | $20,000 |
Estimated Report Costs (Appraisal & Environmental) | $0 | ||
Total Cash Required | $2,000,000 | Total Cash Required | $60,000 |
OWN | |
---|---|
Down Payment (10%) | $2,000,000 |
Estimated Bank Fees (1% of Loan Amount) | $0 |
Estimated Report Costs (Appraisal & Environmental) | $0 |
Total Cash Required | $2,000,000 |
LEASE | |
Prepaid Rent (2 Months Rent) | $40,000 |
Prepaid Rent (2 Months Rent) | $20,000 |
Total Cash Required | $60,000 |
MONTHLY COST
OWN | LEASE | ||
---|---|---|---|
Mortgage Payment | $11,116 | Lease Payment | $20,000 |
Insurance & Property Tax | $2,167 | ||
Repairs, Utilities, Maintenance | $4,000 | ||
Depreciation Write-Off | ($3,205) | ||
Lease Income (if not 100% owner occupied) | $0 | ||
Total Monthly Costs | $14,077 | Total Monthly Payment | $20,000 |
Monthly Costs Per Square Foot | $1.41 | Monthly Costs Per Square Foot | $2.00 |
OWN | |
---|---|
Mortgage Payment | $11,116 |
Insurance & Property Tax | $2,167 |
Repairs, Utilities, Maintenance | $4,000 |
Depreciation Write-Off | ($3,205) |
Lease Income (if not 100% owner occupied) | $0 |
Total Monthly Costs | $14,077 |
Monthly Costs Per Square Foot | $1.41 |
LEASE | |
Lease Payment | $20,000 |
Total Monthly Payment | $20,000 |
Monthly Costs Per Square Foot | $2.00 |
FORECASTED OWNERSHIP BENEFITS
OWN | LEASE | ||
---|---|---|---|
Monthly Mortgage Payment in 10 years | $11,116 | Monthly Lease Payment in 10 years | $26,095 |
Equity After 10 Years | $1,194,592 | Equity After 10 Years | $0 |
Cash Savings After 10 Years | $891,296 | Cash Savings After 10 Years | $0 |
OWN | |
---|---|
Monthly Mortgage Payment in 10 years | $11,116 |
Equity After 10 Years | $1,194,592 |
Cash Savings After 10 Years | $891,296 |
LEASE | |
Monthly Lease Payment in 10 years | $26,095 |
Equity After 10 Years | $0 |
Cash Savings After 10 Years | $0 |