Why Lease?
Real Estate: Residential
Real Estate: Vacation
Real Estate: Commercial & Industrial
Equipment & Transportation
Real Estate
Residential:
For young “starting out on your own” individuals or couples, leasing or renting will help further establish your personal credit rating and prepare you for future home ownership responsibilities, if so desired.
As a newcomer to a specific suburban area, leasing or renting provides an opportunity to spend time assessing the general surroundings to ensure it’s the right neighborhood to stay in for a longer term or to later make a purchase.
Under a “Lease to Own” aka “Rent to Own” scenario, it gives first time and potential home buyers an opportunity to gain ownership over time at a predetermined purchase price with a portion of the monthly lease/rent payment to the landlord being applied toward the down payment while the property value increases. (The ability to structure an arrangement of this type is usually tied directly to market and economic conditions, and your talent to negotiate the right deal).
Leasing can provide a means of living in high quality and full service settings under an “all inclusive” payment arrangement without all the ownership responsibilities i.e. maintenance, taxes, utilities, and ownership insurance costs – great for the retired folks.
Versus home ownership, leasing or renting your residence can offer several benefits such as;
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A property staff to contact when maintenance and repairs are required;
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No snow shoveling or lawn maintenance;
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No worries when you go away on vacation;
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Provides more disposable income for recreation and travel purposes;
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Potential personal income tax deductions related to all or most lease/rent payment expenses;
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No separate property tax payments;
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No mortgage payment interest fluctuating costs – lease/rent payments typically stay fixed for the set term;
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No hassles and costs associated with trying to sell your residence in tough economic times; At the end of the lease or rental agreement you can pack up and walk away without concern for finding a buyer and waiting for a sale to close.
Vacation:
Although many of the reasons for leasing or renting your home (principle residence) could apply to vacation real estate, over the past few years with our ever increasing stressful lifestyles we’re seeing a vast number of people of all ages shifting their home ownership interests to vacation properties while leasing on a three to five year term their principle residence, which is typically located much closer to where they work.
It seems that in our fast paced society today many people are seriously looking ahead to the period of retirement, thus the priority turns to safely but quickly increasing their personal net worth. Essentially, for the same reason the demand for recreational centers or vacation properties within a 2 to 4 hour travel distance from home is causing the purchase price of vacation residences to soar, and at a pace far greater than that of a suburban home.
This certainly tells us that many people are realizing the benefits of leasing/renting their principle residence while building equity in a home by investing their savings into real estate that can rapidly increase in value. And, to minimize the risk, with renting out their vacation residence for certain periods when they’re not making use of it, they can receive additional income to help carry the cost of owning a vacation home, while it just keeps appreciating in value.
On the other hand, for those who already lease/rent or own their principle residences, and whether close to where they work or at a long or short distance commute, when it comes to getting away from the hustle and bustle for recreational or vacation purposes, renting a vacation residence can provide a means of seeing and experiencing a variety of different relaxing settings for the whole family.
Commercial & Industrial:
For every small to large business of any type, leasing commercial office, retail or industrial workspace should be more common than not, and primarily for the following top three reasons;
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In order to effectively grow the business, the more cash available for this purpose the greater the opportunity it has to do so – it costs money to make money and tying up working capital in workspace real estate can surely lead to trouble, despite any appreciation it may gain over time;
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The need to maintain flexibility to expand or relocate the business for whatever reason is next to critical, and in many cases a prerequisite for ensuring the business has equitable value for selling or merging it with a competitor;
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In today’s very competitive business world, standing still or maintaining the business at any given size conflicts with the ability to survive – even the best businesses have to become better and having market share and keeping it is the name of the game.
Equipment & Transportation
These are the primary reasons to consider leasing for both self employed individuals and those who are not:
Preserves Lines of Credit:
Leasing will not tie up valuable lines of credit you may need for other expenses or to fuel growth and expansion. No one in business or otherwise experiences financial difficulty because they have too much available cash.
Flexible Payment Options:
Leasing allows you to establish payment structures to meet budgetary requirements or seasonal cash flows. Lease terms can range from 12 to 60 months with flexible renewal or walk away options.
Simple, Convenient Process:
The process is much easier than purchase borrowing. You achieve 'one-stop' shopping for the equipment and financing. Credit approval and lease documentation is uncomplicated and can be completed very quickly.
Let it pay for itself:
Leasing allows you to use the equipment or transportation item(s) for an agreed upon term and at a fixed payment amount. You pay for it as it's being used to generate revenue rather than spending loads of cash upfront. This helps to maximize the matching of income with investment. A “pay as you profit” approach!
You can establish your acquisition cost in today's dollars, and then use the equipment or transportation item(s) while paying incrementally at today's dollars rather than inflated future dollars. And, later you can easily add extra equipment or accessories at a small increase to your inflation protected monthly cost, while writing off the annual payment costs as a full expense.
Potential Income Tax Benefits:
Lease payments are typically 100% tax deductible as a business expense, lowering your taxable income. And depending upon the residual factor and pre-determined obligations at the end of the Lease, you may only be paying payments based on approx. 70% of the total cost.
Flexible End-of-Lease Options:
At the end of your lease, you can either i) purchase the equipment per the pre-determined purchase option, or ii) upgrade to new equipment, or iii) renew the lease at a substantial monthly savings (refinance the deal), or iv) structure the deal to walk away at the end of the lease with no penalty and no further obligations.
Minimize Balance Sheet Liabilities:
Lease payments may be eligible for "off-balance sheet" treatment, where items are treated as expenses rather than assets or liabilities. This helps significantly improve financial ratios (i.e. debt to net equity).
Finance "Soft Costs":
A lease will typically allow you to include some or all of the expenses associated with the operating use i.e.; shipping, installation, service and maintenance, and extended warranty costs etc.
For a little further insight, check out a short article our CEO and founder recently provided for various Board of Trade and Chamber of Commerce newsletters titled; To Lease or Not To Lease?
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