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Tuesday, September 16, 2008

Daily Observations - Rent vs. Own

As we talk to more and more commercial Realtors and brokers we are being asked to perform this simple but very effective analysis of rent versus ownership.

Traditionally when someone has been renting an apartment before they are able to buy their house this is a common financial analysis that the residential Realtors would do for their client. As a a matter of fact many of the MLS ( Multiple Listing Services ) offers the brokers and Realtors the program to do this anlaysis online for their clients.

However what I am talking about tonight is not residential but commercial. An analysis that is very eye-opening is for the owner tenant to compare their monthly lease obligation to the prospective debt service of acquiring the property. If a lessee can come up with the minimum ten percent to qualify for an SBA loan, the analysis will clearly show that it makes more sense economically to purchase the property rather than to pay rent every month,

At the end of the year all you have to show is rental expense on your profit and loss statement. If on the other hand you purchase the property you would in essence be paying yourself rent to cover the mortgage payment that your business is making. So you get the rental expense and if you hold the property as an individual and not in your business name you will get additional income and the interest write off as well to be used against your personal income, similar with your residential house.

As we are not tax accountants please check with your CPA and Attorney before investment in any property. My point in this blog tonight was to expose you to a new idea. With rates so low, and down payment so low now may be the opportune time to purchase your property for your business,

For more on SBA Loans visit loanforbiz.

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