Q4 Real Estate’s Jason Rogers and Craig Buyers bring you another informational video. This time they are answering the important questions to consider when making the decision to lease or purchase commercial real estate.
(Jason) Craig, why don’t you tell us why you would lease as compared to why you would purchase. And we know the general answer is it depends, but tell us a little more.
(Craig) You are absolutely correct it does depend on your business model Jason. So when I get this question I ask the perspective tenant or buyer what is the most important thing in your business. A lot of them say flexibility, growth projects, rate of return on capital and the answer to those questions are going to determine whether or not you want to lease or purchase.
The number one thing to consider is whether you make more money with your capital or do you get a higher rate of return on your capital if you invested in your business. Whether that is flipping burgers, or maybe making computer widgets, or maybe you get a higher rate of return by investing in real estate and getting monthly rental income. So that’s one question. The other one I touched on is flexibility and growth pattern. So if you are a tenant looking to open maybe four or five locations whether that is a state wide, regionally or nationally, leasing is probably the option for you.
Another point to touch on is being a landlord can kind of be a headache sometimes so you can relieve yourself of being in the landlord role if you are a tenant and you lease from them. So those are some of the things that come to top of mind when I am answering purchase vs lease questions.
So Jason, why don’t you tell us why some businesses would rather purchase.
(Jason) Absolutely. So in today’s world of purchasing, you have low interest rates. Those can be fixed for five or up to ten years for that commercial buyer on the real estate. In addition, with purchase you build that rate, you gain appreciation likely on the property, you have nice tax shelter and for the most part if you were to upgrade your property, it is still your asset. You are putting those build out dollars into your asset and hopefully later on when you do decide to exit, its worth more money.
So there are a lot of reasons why purchase makes more sense and there are a lot of reasons why lease makes more sense. I will turn it over to you Craig to analyze this on what we can do for folks.
(Craig) So if you do have questions on the lease vs purchase options, give us a shout and tell us what you are looking for. Jason and I can certainly help you analyze that and hopefully come up with a solution to that question. You can reach us at 319-294-3339.
We appreciate you guys tuning in. Thank you very much!
You can watch the informational video, Realtor Talk, Lease Vs Purchase with Craig and Jason below.
For more helpful information check out our blog post titled: An NNN Lease Versus a Gross Lease: What’s the difference?
Let one of our knowledgeable listing agents partner with you to find a commercial real estate property perfect for your business needs, and assist you in working through the sale or lease process. Contact Jason Rogers or Craig Byers today!
