Lease vs own
building comparison

Lease vs. own the building: how to decide?

When it comes to finding space to house your business, one of the biggest decisions you face is whether to lease or own the building. Would you be better off writing that rent check to yourself?

There are a number of factors to consider when deciding between leasing vs. owning:

  • Leasing has a lower up front cost, but can cost significantly more over time.
  • You can own for as little as 10% down with the SBA 504 program.
  • Often, monthly payments for leasing vs. owning are quite similar.
  • With owning, you benefit from the building’s appreciation; with leasing, your landlord gets the benefits.
  • Owning your building can give you the opportunity to lease any unused space, lowering your occupancy costs.
  • The equity you build from owning your building can provide a comfortable retirement.
  • Owning your building has tax advantages that leasing doesn’t.

To compare the costs and benefits of leasing vs. owning, contact our experts for a no-cost, custom lease vs. own comparison.

Lease vs Own Building Example Scenario

Property Square Footage 10,000 sf

Own
Purchase Price $2,000,000
Improvements $0
Other $0
Total Project Cost $2,000,000
Total Price per Sq. Ft. $200.00 PSF

Start-Up Costs

Cash Down Payment 10% $200,000
Estimated Bank Fees 1.00% $10,000
Estimated Appraisal & Environmental $5,000
Total Cash Required $215,000

Monthly Costs

Mortgage Payment (monthly) $1.09 $10,946
Taxes $0.01 $1,800
Insurance $0.02 $200
Monthly Expenses $0.40 $4,000
Total Monthly Payment $1.69 PSF $16,946

Total Adjusted Monthly Costs

Total Monthly Payment $1.69 $16,946
Less Depreciation ($0.34) -$3,419

$13,527.61

$1.35 PSF

Forecasted Ownership Benefits

Monthly Mortgage Payment in 10 years $10,946
Cash Savings After 10 Years $1,079,323
Equity After 10 Years $1,165,254

Assumptions: Depreciation est. at 80% allocation of purchase price. Future mortgage rate assumes fixed-rate 1st mortgage. Cash savings est. based on fixed mortgage payments vs. appreciated lease payments less additional start up costs to purchase. Equity assumes 2% annual building appreciation.

Lease
Monthly Lease Rate $20,833
Lease Rate per Sq. Ft. $2.08 PSF

Start-Up Costs

Prepaid Lease 2 Months Rent $41,667
Security Deposit $10,000
Total Cash Required $51,667

Monthly Costs

Lease Payment $2.08 $20,833
Total Monthly Payment $2.08 PSF $20,833

Total Adjusted Monthly Costs

Total Monthly Payment $2.08 $20,833

$20,833.33

$2.08 PSF

Forecasted Cost of Continuing to Lease

Monthly Lease Payment in 10 years $27,183
Cash Savings After 10 Years $0
Equity in 10 Years $0

Assumptions: Assumes annual lease rate increase of 3%.

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Success Stories

FlexCare Medical Staffing

FlexCare Medical Staffing

Was leasing and needed room to grow: “Our cost per square foot dropped 20%,” says CEO Travis Mannon, “and rates are so low you’d be crazy not to buy.”

AutoCrib, Inc.

AutoCrib, Inc.

Unified manufacturing operations with a larger facility: “Owning is really the way to go because you get to depreciate the building in a tax-advantaged way,” says founder Stephen Pixley.

Folktale Winery

Folktale Winery

Expanded with new winery, vineyard and tasting room: “It was a challenging deal, but TMC did a great job of managing the challenges,” says owner Greg Ahn.

Rush Creek Lodge

Rush Creek Lodge

Yosemite resort opens spring 2016: “Without the SBA piece from TMC we couldn’t have gotten this done,” says owner Lee Zimmerman.