When it’s time to find space for your business or expand your investment portfolio, one of the first questions you’ll face is: Should I buy or lease? It’s a big decision—and the right answer depends on your goals, financial situation, growth plans, and risk tolerance.
At Annie Scott Realty Group LLC, I guide buyers and tenants through this process every day. Here’s how I help clients in Indiana think through the buy vs. lease decision—and what you should consider before making your next move.
1. Cash Flow & Capital Considerations
Buying a commercial property often requires a larger upfront investment, typically 20–30% down, plus closing costs and improvements. However, it can build long-term equity and eliminate future rent increases.
Leasing requires less cash upfront—usually just a security deposit and some build-out costs—making it ideal for businesses that need to conserve capital for operations, hiring, or growth.
Ask yourself:
- Do I want to build equity or preserve cash?
- Can I afford the down payment without draining reserves?
2. Business Flexibility
Leasing offers greater mobility. If your business is growing rapidly or might need to relocate, a lease allows you to move more easily at the end of the term.
Buying offers stability. If you’re confident in your location and plan to stay long-term, owning can give you control over future improvements and stability in occupancy costs.
Ask yourself:
- How fast is my business changing?
- Do I want the freedom to relocate in 3–5 years?
3. Long-Term Investment Potential
Buying commercial real estate is not just a business move—it can be a wealth-building strategy. You gain potential appreciation, rental income from extra space, and tax benefits like depreciation and mortgage interest deductions.
However, property ownership also comes with responsibilities, such as maintenance, management, and exposure to market fluctuations.
Ask yourself:
- Am I ready to manage property or hire help?
- Do I want to own for income or just for my own use?
4. Tax Implications
Owning can bring substantial tax benefits, including depreciation, deductions on mortgage interest, and potential 1031 exchanges when selling.
Leasing also offers deductions—most lease payments and operating expenses are fully deductible as business expenses—but you won’t benefit from property appreciation or equity buildup.
Ask your CPA:
- Which strategy aligns with my tax goals?
- Would ownership help reduce my tax burden?
5. Market Conditions & Opportunities
In some areas of Indiana, the cost of owning commercial property is comparable or even lower than leasing—especially in up-and-coming markets like Fishers, Westfield, or Zionsville.
In high-demand areas, however, buying may be more competitive or require longer timelines to secure financing and approvals. Leasing can offer faster access to a prime location.
Ask yourself:
- What’s the price-per-square-foot to own vs. lease in my target area?
- Are there good opportunities available right now?
6. Your Exit Strategy
Leasing lets you walk away at the end of the term or sublease if your plans change (subject to approval). Buying requires more planning to sell, refinance, or lease the property later.
But if done right, ownership can position you to sell at a profit or transition the property into a passive income stream when your business moves on.
Ask yourself:
- Do I want a long-term asset I can sell or rent out?
- What’s my 5- to 10-year plan?
Final Thoughts: Know Your Goals, Then Make the Move
There’s no universal answer to buying vs. leasing. The right path depends on your business model, your finances, and your long-term vision. At Annie Scott Realty Group LLC, I help business owners and investors evaluate their options with a full picture in mind—not just the monthly payment.
Let’s talk about your goals—and whether ownership or leasing will take you there faster.
Photo Credit: Luxury Presence
Sources:
- Indiana Commercial Real Estate Board
- SBA Loan Programs and IRS Deduction Guidelines
- CREXi and CoStar Market Comparables
- Business Owner Tax Strategy Advisors
