Rent Replacement (Build Your Wealth Through Ownership)

Resources: Own vs. Lease Calculator | Loan Estimator

Don’t pay rent, pay the mortgage and own your building

Instead of paying a landlord every month a business owner can purchase a building. When the building is paid off, the business owner will have the building as an asset and additional cash flow. This is an excellent way for a business owner to build wealth.

Factors to consider before buying a building:

• How long will the building remain the right size for my business? Will my business grow out of the building too soon?
• What if my business needs less space? Is the space flexible enough to have a tenant lease part of the space?
• Do I want to be responsible for maintaining the property and improvements?
• Will the building become outdated soon or no longer be in the ideal area of town as my business grows?
• The building value is subject to real estate market conditions. If the real estate market isn’t strong, the selling price may be below your expectations.
• Do I have the cash now to invest 10% or 20% toward the purchase of the building?

Advantages

• Fixed loan payment amounts that will not fluctuate at lease renewals.
• Increased appreciation of the value of the land and building as real estate market prices improve.
• Build equity in the property as you pay down the loan, creating a value to you as you look toward selling your company or retirement.
• Have control of your space with no landlord overlooking your changes and improvements.

Tax Considerations

• Rent/Lease – 100% deductible as business expense
• Purchase/Own – Interest on loan is deductible. Depreciation of the building and improvements is deductible on your taxes based on a 39-year amortization.