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Commercial Lease Vs. Own

Businesses have struggled for decades with the decision whether to buy or lease their facilities.  The question can become overly complicated as objective (financial, space needs, etc.) and subjective factors (business image, growth plans, pride of ownership, etc.) combine.  Forces outside of the business owner's control, such as the general economy, commercial interest rates, commercial loan options and future real estate values further obscure the issue.

However, now is one of the best times to purchase commercial real estate since the Great Depression.  Property values have dipped between 20 - 40% nationwide and 90% financing is widely available (We offer it!).  Rates are hovering near all time lows and we have fixed rates from 5 to 20 years.  Many of our clients are buying properties at 30 to 40% of what the original cost to build was...

Keep in mind that purchase financing is by far the easiest and most reliable form of financing to get in the business (compared to refinances, lines of credit, etc).  Borrowers that want to purchase a building that they currently rent, are in even better positions.  Also, we have renovation financing, at 90%.  So buy that foreclosed commercial building for 40 cents on the dollar an we will provide the renovation capital to bring it up to your specifications and still save a tremendous amount of money. 

Don't let the media persuade you not to try!  If you have 10% for a down payment and your business is turning a profit we want to talk to you!  The American economy will come back.  It may not be in a few months, but when it does, those that had the courage to invest in commercial real estate now will become rich.  Don't miss out on this once in a life time opportunity.  Fill out our pre approval form for immediate, thoughtful answers. 

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Some of the major pros and cons of ownership include:

Pros 

·   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 

·   Creation of Equity 

·   Business image

·   Not being exposed to increases in rental market

·   Not being exposed to whims of landlords

    ·   Dramatic Tax Benefits

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?

As discussed above, our opinion on these questions is currently a resounding yes! that investing in commercial real estate for your business is one of the smartest investments available.  Property values will come back up, interest rates are low and you only have to come in with 10% down...

Fill out our pre approval form to get a better idea of what your potential rates and terms would be. 

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