what qualittative factors must one consider in his/her decision making regarding rent verses buy options?

Expert Solution

Factors Favoring Leasing:

Cash flow: A business can conserve its cash flow by leasing. Under a lease, the initial cash expense for the facility will be a month's rent and a security deposit.
Credit rating: The company has not established a credit rating sufficient to support a mortgage.
Maintenance: The landlord is responsible for maintaining the property.
Tax Savings: Rent is deductible as a business expense.

Factors Favoring Purchasing:

Long-term savings - In the long run, purchasing a facility is usually cheaper than leasing. In a lease, the landlord attempts to build a profit for himself into the rent. Payment of this profit premium can be avoided by buying the facility.
Control - There are substantial renovations that you want to make to the property, or you may want to control your own business hours and the way you do business. By purchasing the property, you have control over these matters (subject, of course, to local ordinances and zoning boards).
Tax savings - Depreciating the property over time may bring you tax savings. In addition, if the property is financed, interest based deductions are available.

jeff jeffy answered 2 years ago

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