There are circumstances when it makes sense to buy and finance a property rather than lease.  One key factor is whether you are looking a free-standing building for just your business.  The other key factor is the availability of buildings in your size and in your chosen submarket; alternatively, the availability of land for sale.  If you, dear reader, have been looking for a building to buy in the Los Angeles market, you’re probably rolling your eyes; rightly so, as small buildings for sale are extremely scarce.  But in outlying markets like the Antelope Valley (Palmdale and Lancaster), while there may be a dearth of buildings to buy, there is a lot of cheap land available.

I have a medical client that has a substantial patient base in Palmdale and Victorville and they set me to the task of finding them clinic space to lease in those markets.  In Victorville, a build to suit opportunity presented itself and the more we looked at the opportunity, the more desirable the idea of owning their own building became.  One of the biggest incentives comes in the form of SBA financing that has never been more attractive.  We then shifted gears in Palmdale and found the same opportunity.  The client’s CFO did the math and reported that, even with relatively low rents in these two markets, building and financing buildings would save them $22,000 per month.  You read that right: building and purchasing two 7,000 square foot buildings would be $22,000 a month cheaper than renting them.  That’s a lot of bandages.

Some businesses might be concerned over committing company capital to real estate.  That is an important issue.  But there is always the exit strategy of selling the building and leasing it back if the redeployment of that capital in the business will bring greater returns.

Buy vs. Lease – it is an interesting choice and usually worth looking into, Be sure to have a real estate expert in the conversation to help you twist the lens and bring the advantages and risks ow owning into focus.