What’s Smarter – Buying or Leasing Industrial Space in Northern Nevada?0

Posted by Thomas Miller, CCIM

miller-industrial-properties-buy-or-lease-industrial-real-estateDetermining whether renting or leasing industrial space in northern Nevada is the smarter move for your business depends on a number of factors. The easiest way to make the right decision is with an in-depth analysis conducted by a real estate professional who will deliver the results in a clear and organized report. But understanding the advantages and disadvantages to the process of both buying and leasing in northern Nevada is a step in the right direction.

Leasing Advantages

  • Keeps cash available
  • Reserves company debt availability
  • Lease payments are tax deductible
  • Available source of financing, as you acquire an asset for a marginal cost
  • Lease term agreement means fixed cost stability and predicability
  • Offers ease of expansion or downsizing within the facility or into a new one
  • Potential for broader range of locations not available in the for-sale locations
  • Allows you to focus on business, not real estate

Leasing Disadvantages

  • Can be more expensive for a firm with good earnings, financing availability and opportunity to benefit from tax perks
  • Potential for long-term lease commitment
  • Potential for loss of property appreciation
  • Lack of control over other tenants and facility operations

Owning Advantages

  • Tax savings from depreciation and mortgage interest
  • Potential for appreciation
  • Potential income from tenants
  • Full control

Owning Disadvantages

  • Burden of initial cash outlay
  • Challenging financing
  • Impact of negative balance sheet of mortgages and trust deeds
  • Costs associated with zoning requirements and new regulations
  • Risk of market value fluctuations
  • Potential inflexibility due to lack of expansion and contraction abilities

Understanding the Process

These intangible elements to buying or leasing industrial real estate market in northern Nevada are but preliminary concepts to understand. There are also financial comparison techniques that must be performed. A comprehensive analysis, performed in after-tax dollars, is the best way to make the most sensible financial decision.

A comparison between the relative capital investment for both options to the user’s after-tax discount rate/opportunity cost is then used in a sensitivity analysis. This gives a yield to be compared with the user’s opportunity cost, which can be used as an indication of whether the capital investment is better suited to buying or investing.

The decision to buy or lease here in northern Nevada or anywhere isn’t simple, and making the wrong decision can be detrimental to your business’ future success. Bringing in an expert, like the experienced agents at Miller Industrial Properties, to help you carefully weigh all considerations – and ensuring you aren’t overlooking something critical – is the best way to make an informed decision.

Our posts are intended to educate commercial real estate users so they can make better decisions in their real estate use, investments, buying and selling. We encourage your input and commentary. If you are enjoying these posts and finding them useful, help spread the word via Facebook, Twitter, LinkedIn, Google + or email with the buttons above.

About the Author

Thomas Miller, CCIM

Thomas Miller, CCIM is the president and broker of Miller Industrial Properties in Reno, Nevada. He has worked in industrial real estate since 1991, with 15 years of previous experience designing and building industrial warehousing and manufacturing facilities in the northern Nevada market. Contact Tom at tom@mipnv.com or 775-742-9891.

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