Yerkes Upstate SC Blog

Mini Benefit-Risk Analysis - Leasing vs. Ownership

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


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