Lease versus Purchase
With the low interest rates and the uncertainty in the stock markets, many investors are choosing real estate to diversify their investments. One of the most predictable and simple investment opportunities may be the office space used by your business. From office condominiums to free-standing buildings there are more choices in the metro Atlanta markets than ever before. There are pros and cons to consider based on your business and your personal investment strategies.
The purchase option has given many business owners the ability to sell their business and have residual real estate income. The real estate provides stability in the short term, and retirement income in the future.
On the other hand, leasing offers flexibility in your location and size with little initial cash contribution.
Consider all the factors before you buy or sign your next lease or lease renewal. You might start by making a list of the pros and cons and then do a side by side lease vs. purchase financial analysis for your particular best choices.
Advantages and Disadvantages:
| Purchase | Lease |
| Building equity Low cash requirement | Control occupancy cost No long term commitment |
| Can’t be forced to move | Could be forced to re-locate |
| Future Rental Income | Easy to re-locate |
| Cash investment required | No equity or wealth building |
| Some management responsibilities | Possible increasing rents |
For a financial comparison, consider the effect on your business. Will a large building lease bring more referrals and increase your business? Will the free parking and signage possible with ownership attract more customers? How might each location increase or decrease your volume? With the time frame in mind, do the math. First compare any moving costs and all the occupancy costs of each choice over a ten year period. Then you are ready for a side by side financial comparison.
On the purchase options, compute the negatives like the lost benefits of the cash outlay and any management cost or time. Then compute the positives aspects of appreciation, loan principal reduction and tax benefits. Your lease vs. purchase decision is much easier when you can see the bottom line of each choice.
For example, the principal reduction and appreciation of the property over a typica lease time period can easily tip scales in favor of purchase. We have helped many of our clients to secure 100% financing of the purchase of their office space including capital for equipment. If you decide to relocate, the property can be leased to another business for income.
An experienced commercial real estate broker who understands the real estate market can help you negotiate as many choices as possible and help you “do-the-math” so you are the ultimate winner of the lease vs. purchase battle.
We hope this information has given you a clearer idea of the real estate investment options open to you. If you have any further questions or would like to discuss strategies that will help you reach your financial goals, let us take you there! Contact us a (404) 477-2044 or email info@lynxre.com.