Commercial Property -- lease or buy?

[nidena]

If you're a business owner, do you lease or buy your commercial property?

Pros?
Cons?

For either.

[tskeeter]

Most smaller businesses do not have the financial resources to buy commercial property.  So they rent.  Large businesses often find that,even though they have the cash, their cost of capital is high enough that leasing is more cost effective than owning.  Or their return on capital from using their cash for purposes other than buying buildings is much better than owning commercial property.  In addition, leasing provides flexibility.  Flexibility for growth, flexibility for shifting market strategies, flexibility about location, flexibility for flexibility’s sake.  In a world where six months is considered long term, leasing makes a lot more sense than owning.

[bookkeeper]

The expense of a lease can be deducted in the same tax year it was paid.  Principal payments made to purchase a property are not tax deductible.  

This consideration is why some businesses choose to lease vehicles, buildings and heavy equipment.  Stepped up depreciation has made leasing vehicles and equipment less attractive since they can be written off in two years.

I have a neighbor who is a small businessman.  The warehouse that he rented burned to the ground a few years ago with his inventory.  He chose to build a new building to increase the size of his storage and have a fixed principal and interest payment on that asset.  He and his wife also purchased another commercial building that houses an auto parts store as a commercial rental. They look at that building as passive income as they age.

The OP's question has many answers depending on the business at hand.  I would be visiting with my banker and CPA to help make a decision.

[jeffreymo]

When we had a business - we didn’t have the capital needed to be property owners and build a business at the same time so there was only the option to lease.