A common decision in real estate comes down to should I lease or should I buy. This pertains to residential single-family homes and commercial real estate. Often times there are business owners and corporations who have the option to purchase an office building, a stand-alone retail space, or any property in between.
When it comes to a lease or buy situation there are several considerations that must be addressed before coming to a final decision. Of course there are the financial decisions, tax incentives, short term and long terms goals of the company/individual and current economic climate to take into account. Each factor will play a different role and be weighted differently in each decision, depending on the values and goals of the buyer, however here are a couple of rules of thumb.
- Assuming you have enough for the down payment required, if your monthly mortgage payments + insurance + property tax + maintenance are less than it would cost to rent a similar location, then buy.
- If you’re a new company, lease. Your cash should not go to a down-payment, it should go into the business. If you’re a growing company, it depends. If you’re a mature company, it depends.
- Regarding taxes, lease payments are all tax deductible and with purchase the mortgage interest is tax deductible as well as the depreciation on improvements. You will have to do the math, hopefully with your accountant.
- The property must also be viewed as an investment, and with an investment there are ROI requirements that must be considered.
- Lastly you must be aware of the current economic environment, both nationally and locally in order to make an informed decision on what to do. Buying at the right time will play the largest part in purchasing a solid property.
These are just a few guidelines to used in your initial assessment. To further understand the implications of your decision it is always helpful to consult an experienced commercial broker, accountant and attorney to make the most informed decision you can.