When it comes to industrial real estate, knowing whether to buy or to lease can be confusing. But with a bit of investigation, there is almost always one clear answer. The trick is in how to discover it. Prospective lessees or owners of industrial real estate will be familiar with comments such as:
• Leasing conserves your cash.
• Leasing is a far more flexible real estate position.
• Leasing frees up use of debt.
• Buying generally affords significant tax benefits.
• Buying an asset might lead to asset appreciation over time.
And the list of general statements like them goes on and on. Most, if not all, are both true and not so true. It all depends on your specific circumstance. Unfortunately, major purchasing or leasing decisions can sometimes be based on such generalized commentary and not on specific-case needs – never the best place from which to make a decision. So what’s the trick? When deciding whether to purchase or lease industrial or commercial real estate, begin from a place of fact, not commentary.
In order to make an informed decision about purchasing versus leasing, it’s critical to begin with concrete, factual data. Considerations include:
• Size needs today, in three to five years and thereafter
• Location in town, with thought about what that location will offer in 15 years
• Specific amenities necessary today and ten years down the road
• Available cash, available debt
• Opportunity costs of your down payment versus other uses
• Appreciation, depreciation and maintenance costs
• Costs of leverage (financing)
• Return on your investment
This list of matters to consider could go on for many pages and still not be complete based on your specific needs, desires and resources. The takeaway from this is that your real estate professional – someone who is trained and certified in real estate investment – can be of invaluable assistance. He or she will ask the right questions; assess your real needs today and anticipate them into the future; and provide a detailed, comprehensive series of bottom-line analysis that clearly outline all your cash flows, costs before and after tax and the ultimate return of your investment along with wealth accumulation estimates for each of your options. This is the level of information you need in order to properly assess your options and determine which option is in fact the best choice for you at this time. Anything less means you will be making a seriously important decision without knowing all the facts.
Some real estate professionals have committed to undertaking an extensive program of extensive real estate investment analysis and have gained accreditation in that specific field. These professionals are called Certified Commercial Investment Managers (CCIM) and they hold a degree issued by an international society dedicated to a high level of education in this financial field. To best serve your needs, seek out an experienced CCIM in your area.