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.