PITFALLS OF LEASING VS PURCHASING

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Real Estate

If you have been considering finding a new space, you might have been wondering whether to purchase or lease a property. Leasing can seem like an appealing option if you don’t want to pay a lump sum of money, however it does have its downfalls. In this article, we will break down the pitfalls of leasing a space rather than owning it. 

Reason 1: No control over the space

If you own a property and you don’t like the walls? Tear them down! Paint them purple! Don’t like the backyard? Throw a pool and some bamboo in it! When a space is all yours, you can change whatever you like, build anything, or tear anything down. 

With leasing, you don’t have the final say in the space you are occupying. You need approval for any changes you would like to make, and if they disagree then they can simply say no. 
 
If you want to have control over how a space looks, functions, and acts, then buying a property may be a better option for you.

Reason 2: No passive income

As a landlord owning a space, you have the option to rent it to others and sit back and watch as your passive income collects with no work needed on your part. This is a big reason why purchasing a space may be better than leasing. With the leasing option, you are the one paying to stay in the space and the owner collects the passive income from you. 
 
Renting may be cheaper in the short term because you don’t have to put a large down payment down, but in the long run, buying property leaves you more room to make money off it. 

Reason 3: No equity or benefits from appreciation

When you lease a space, you don’t accumulate equity and thus, you aren’t able to benefit from capital appreciation. With owning, this is not the case. You can continue to accumulate equity as the years pass. 

Reason 4: High rent!

Oftentimes monthly rent payments are actually more expensive than mortgage payments for the exact same space. NNN lease agreements which are typical, hold the tenant responsible for insurance, property taxes, utilities, and maintenance. These costs added to the lease payment often bring that total up to higher than the mortgage. 
 
In conclusion, though renting provides you more room for flexibility and less responsibility, there are many negatives as well. It makes more sense to consider purchasing property rather than leasing it,  if you can afford that initial down payment. That way, you have the freedom to do whatever you wish with your property, and if you no longer want to use it, rent it out to someone who does and collect passive income from them! The right decision when it comes to buying vs renting all depends on your situation, but hopefully you have some insightful pointers to consider now as you contemplate your own decisions.
 
If you need help with analyzing a specific property in terms of buying or leasing, feel free to reach us. We would be happy to provide you with a detailed analysis and help you make an educated decision.