Some Benefits of Leasing:
- Easy means to occupy real estate, often with lower up-front capital requirements.
- Ease of disposition at end-of-term.
- Ability to select a length of lease term, within reason, to support operational requirements.
- Flexibility of growth, contraction, long or short term, etc.
Some Risks of Leasing:
- Fluctuations in market pricing and landlord-provided allowances, incentives, etc.
- Potential for loss opportunities, associated missed options, and notice dates.
- Disposition prior to end-of-term can be challenging, depending on supply and demand, and on other factors.
- Most often dependent on third-party management for quality of life and service issues.
Some Benefits of Ownership:
- There comes a point in time after which, with continued occupancy, ownership becomes less expensive each year on a cash basis.
- Depreciation (may not be beneficial to publicly held companies).
- Income tax benefits.
- Capital appreciation.
Some Risks of Ownership:
- Ownership of real estate is a separate business that requires attention.
- Potential loss of value.
- Interest rate and economic risk.
- Neighborhood, transportation, and demographic risks.
- Less flexibility than leasing.
Source: It's Not Just About Real Estate by Andrew B Zezas
Yerkes Upstate Real Estate Services
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