OWNING VS. LEASING YOUR INDUSTRIAL SPACE
There are various reasons why owning your space is beneficial as opposed to leasing. The information below describes the benefits of becoming an owner of your industrial space.
Growing Equity
By investing in real estate, you will be able to create equity.
Stable Payments
Rental hikes will not be a concern and mortgage rates are currently fairly stable.
You Help Decide Management Fees
Decided by the condo board which you can elect to be a part of and participate in annual meetings.
Upgrades Add Value
Improvements completed will increase the value of your investment, thus increasing the equity value.
Long Term Benefits
Property becomes an investment under your control, giving you an option to sell with or without your business or rent to a user for additional income.
No Value Generated
While renting, you cannot create equity through property, so no long term economic benefits are attained.
Rental Hikes
Rental hikes are beyond your control and left to the Landlord and market to decide.
Management Fees Decided For You
Controlled by the Landlord/Management company, beyond your control.
Improving Space Adds Cost
Improvements become part of the space resulting in possible rent increase.
No Value Carried Forward
No economic benefits will be carried forward once the lease ends and you no longer occupy the unit.
LEASE VS. OWNERSHIP ILLUSTRATION
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
Net Rent psf |
$8.00 | $8.00 | $8.00 | $8.00 | $8.00 |
Operating Costs psf |
$4.30 | $4.30 | $4.30 | $4.30 | $4.30 |
| $12.30 | $12.30 | $12.30 | $12.30 | $12.30 | |
Annual Rental Payments |
$65,522 | $65,522 | $65,522 | $65,522 | $65,522 |
Monthly Rental Payments |
$5,460 | $5,460 | $5,460 | $5,460 | $5,460 |
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
Interest |
$45,000 | $44,057 | $43,067 | $42,028 | $40,936 |
Principle Repayment |
$18,857 | $19,800 | $20,790 | $21,830 | $22,921 |
Annual Mortgage Payment |
$63,857 | $63,857 | $63,857 | $63,857 | $63,857 |
Monthly Mortgage Payment |
$5,197 | $5,197 | $5,197 | $5,197 | $5,197 |
Estimated Annual Condo Fees |
$22,906 | $22,906 | $22,906 | $22,906 | $22,906 |
Estimated Monthly Condo Fees |
$1,909 | $1,909 | $1,909 | $1,909 | $1,909 |
Monthly Mortgage & Condo Fees |
$7,230 | $7,230 | $7,230 | $7,230 | $7,230 |
Monthly Principle Reduction |
$1,571 | $1,650 | $1,733 | $1,819 | $1,910 |
Net Monthly Ownership Cost |
$5,659 | $5,580 | $5,498 | $5,411 | $5,320 |
*Mortgage Estimates
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Lease | $5,460 | $5,460 | $5,460 | $5,460 | $5,460 |
| Own | $5,659 | $5,580 | $5,498 | $5,411 | $5,320 |
Unit Size sf |
5,327 |
Unit Sale Price psf |
$168.95 |
Purchase Price |
$900,000 |
Loan to Value Ratio |
100% |
Mortgage Available |
$900,000 |
Mortgage Rate 5 Year Term |
5% |
Mortgage Amortization (years) |
25 |
Mortgage Term (years) |
5 |
Condo Common Element & Taxes psf |
$4.30 |