Commercial Lease Vs. Own

·   The creation of equity

·   Monthly mortgage payment is usually lower than comparable lease payment

·   Potential future rental income

·   Assisting owners with wealth/retirement

·   Building an asset that will assist in securing business lines of credit and other forms of loans

·   Pride of ownership

·   Stability

·   Control

·   Business image

·   Not being exposed to increases in rental market

·   Not being exposed to whims of landlords

Cons
   ·   Property management responsibilities
    ·   Interest rate exposure on adjustable mortgages and/or if mortgage balloons
    ·   Opportunity costs of down payment not being in a more liquid asset, or being used for
      business operations
    ·   Decrease in functionality of building
    ·   Building value subject to market conditions
   ·   Length of time in selling building 
   ·   Decrease in space flexibility

Although, for many business owners the question boils down to money or cash on hand.  First of all, does the business owner have the capital needed for the down payment?  (Many entrepreneurs are surprised to learn that they are now able to come in with only 10% down on almost all building purchases).  

If they do have the required capital, the question than becomes should they use this money as the down payment to buy the property, or should they use the cash in some other investment?  When all factors (tax rate, tax benefits, interest rate, inflation, depreciation, expected holding period, etc.) are considered, which will have the greater return?

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