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