One of the craziest things I run across in my line of work is how many professionals lease their building. Remember I am dealing with legal and medical professionals, so they are probably not going to change their occupations anytime soon. I hear all kinds of reasons as to why they choose to lease, and to each their own. What I like to do is try and provide some factual data and see if they are truly making the best decision for them.
Let’s use Downtown Las Vegas for an example. There are thousands of attorneys down in this area, many of them leasing their building. I will use slightly modified, real-life examples to give you a visual. I recently had an attorney that I met with and as we were talking I found out they were leasing their building. It was a 3 office, 1200 square foot building and they were paying about $2000 per month to rent it. They also had about $100,000 in savings that they were sitting on, which was earning them a whopping .1% interest (about $100 a year). A building like that probably sells for about $300,000.
Let’s do the math.
$60,000 Down Payment
5% Interest on the Loan
$5000 Cost of Origination Loan (Approx.)
25 Year Amortization
MONTHLY PAYMENT $1400 Approximately
Taxes and Insurance $300 per month
Total Cost $1700 (Approx.)
Savings Over Leasing $300 per month
I try and base everything I do for my clients on saving them money and helping them to realize their long-term goals. A transaction like this accomplishes both of those goals for the client. Often the idea of going through a purchase like this is not worth the hassle for a business owner, but is it worth it if it saves you $36,000 in rent over the next 10 years that you would never get back from a lease? Remember your $100,000 in savings is only earning $100 per year in interest. This also gives you the opportunity to have another free and clear asset at retirement that you would not have by renting… and it’s cheaper.
I understand that this is not for everyone, but it is my goal to let people know their options. I would recommend everyone in a similar situation to do some research and reach out to a lender and/or real estate agent they trust and figure out if this is a feasible option for you. Plus, saying “I Own My Building” has a special ring to it.
Please leave a comment or contact me with questions.