Every business needs a place to operate, and sooner or later most owners face the same question: should we keep leasing, or is it time to buy?
There’s no single right answer. It depends on your finances, your growth plans, and how long you expect to stay put. Here’s a practical look at leasing vs buying commercial property so you can make the right call for your business.
The Case for Leasing
Leasing makes a lot of sense in certain situations:
- Lower upfront cost. A security deposit and first month’s rent cost far less than a down payment.
- Flexibility. If your business is growing fast or your needs might change, a lease makes it easier to move.
- Less responsibility. Depending on the lease, the landlord may handle major repairs, roof replacements, and building systems.
- Cash stays in the business. Money that isn’t tied up in real estate can go toward equipment, inventory, or hiring.
The Downsides of Leasing
- Rent goes up. Most leases include annual increases, and renewals can bring big jumps.
- No equity. Every rent check builds your landlord’s wealth, not yours.
- Limited control. Renovations, signage, and layout changes usually need landlord approval.
- Uncertainty. When your lease ends, the landlord can raise the rent significantly, sell the building, or decide not to renew.
The Case for Buying
Owning your building offers long-term advantages that leasing can’t match:
- Build equity. Each payment increases your ownership stake, and the property may appreciate over time.
- Predictable costs. With a fixed-rate loan, your payment stays stable instead of climbing with the market.
- Full control. You decide on renovations, layout, signage, and how the space is used.
- Rental income. If you don’t need the whole building, you can lease extra space to other tenants.
- Potential tax benefits. Owners may be able to deduct mortgage interest and depreciation. Talk with your tax advisor about your situation.
- A long-term asset. Your building can become part of your retirement plan or exit strategy.
The Downsides of Buying
- Down payment. Buying requires cash upfront, although programs like the SBA 504 reduce that significantly.
- Maintenance and repairs. As the owner, you’re responsible for the building.
- Less flexibility. Selling a building takes longer than moving out at the end of a lease.
Comparing the Numbers
The right choice often comes down to a simple comparison: what would you pay to own versus what you’re paying to rent?
Here’s an illustrative example for a business paying $9,000 a month in rent and considering a $1.2 million building:
| Leasing | Buying With an SBA 504 | |
|---|---|---|
| Upfront cash | Deposit and first month | About 10% down ($120,000) |
| Monthly cost | $9,000, rising each year | Fixed payment on most of the loan |
| Equity after 10 years | $0 | Growing ownership stake |
| Control over the space | Limited | Full |
The exact numbers depend on rates, terms, and the property. Our SBA 504 loan calculator lets you plug in your own project and compare the payment to what you’re paying in rent today.
When Buying Usually Makes Sense
Buying tends to be the better move when:
- Your business is stable and profitable
- You plan to stay in the area for at least five to ten years
- Your rent keeps increasing at renewal
- You want to make significant changes to your space
- You’d like to build equity as part of your long-term plan
When Leasing Usually Makes Sense
Leasing may be the better fit when:
- Your business is very new or growing quickly
- You’re not sure about your long-term location
- You’d rather keep cash available for operations
- The right building for sale simply isn’t available
How the SBA 504 Changes the Equation
For many business owners, the biggest barrier to buying is the down payment. Conventional commercial loans often require 20% to 30% down.
The SBA 504 loan lets qualified businesses buy with as little as 10% down, with a long-term fixed rate on a large portion of the loan. That can make owning your building far more achievable, sometimes with a monthly payment close to what you’re already paying in rent.
Learn more about the SBA 504 down payment and how owner-occupied commercial real estate loans work.
Talk Through Your Options
Intermountain Business Lending helps Utah business owners figure out whether buying makes sense and how to structure a 504 loan that fits. If you’re tired of rising rent, let’s look at the numbers together.
Contact our team to get started.