Lease vs buy calculator for commercial real estate
Every rent check builds your landlord's wealth. This free calculator shows what those same dollars could build for you: the equity you would have if you bought your building with as little as 10% down through an SBA 504 loan.
Compare leasing your space to owning it
Slide the inputs to match your situation. The calculator compares the equity you would build by owning against the total rent you would pay by leasing over the same period.
Estimates for comparison only. Assumes a 25-year amortization, steady appreciation, and annual rent increases. Not a loan offer, rate quote, or tax advice.
How the lease vs buy math works
No black box. Here is exactly what happens on each side of the comparison.
The ownership side
The calculator finances your purchase with the down payment you choose and amortizes the loan over 25 years at your selected fixed rate, the same structure as an SBA 504 loan. Each year the property appreciates at the rate you set and the loan balance shrinks as payments are made.
- Projected property value = purchase price grown by annual appreciation
- Remaining balance = loan paid down month by month
- Your equity = projected value minus remaining balance
The leasing side
The lease side adds up every rent check you would write over the same time horizon. Commercial leases almost always include annual escalations, typically 2% to 4%, so the calculator compounds your rent each year at the increase you select.
- Total rent paid = monthly rent, compounded yearly by the rent increase
- Equity after the final payment: $0
- Renewal risk: your landlord sets the next number, not you
What leasing really costs a business owner
Rent is not just an expense. It is equity you are building for someone else.
Rent compounds against you
A $12,000 monthly lease with 3% annual increases costs about $1.65 million over ten years, and the last year runs roughly 30% higher than the first. A 25-year fixed loan payment never goes up. Owning converts your single biggest occupancy risk, rising rent, into a fixed cost you control.
Equity is a second retirement plan
Many business owners end up with more wealth in their building than in their business. Own the real estate in a holding entity, lease it back to your operating company, and when you eventually sell the business you can keep collecting rent or sell the property separately.
You already pay the operating costs
Under a triple net lease you pay property taxes, insurance, and maintenance on top of base rent. Ownership carries those same costs, but the payment that replaces your rent builds equity month after month instead of vanishing.
Control of your location
No surprise non-renewal, no landlord selling the building out from under you, no restrictions on signage, buildout, or hours. For customer-facing businesses, losing a proven location to a lease dispute can cost far more than the real estate itself.
We see this math play out across every property type we finance, from hotels and self storage facilities to car washes, medical practices, and restaurants. The operators who buy their buildings are the ones who own a valuable asset a decade later.
When leasing still makes sense
Buying is not the right answer for everyone. Leasing usually wins in a few specific situations.
Lean toward leasing if
- Your horizon is shortIf you may relocate or outgrow the space within three to five years, transaction costs can eat the equity you would build.
- Your space needs are unpredictableFast-growing or seasonal businesses sometimes need the flexibility to scale square footage up or down quickly.
- Capital earns more inside the businessIf every dollar reinvested in operations returns more than real estate appreciation plus principal paydown, deploy it there first.
Lean toward buying if
- You plan to stay five or more yearsTime is what turns appreciation and principal paydown into serious equity.
- Your rent keeps climbingEvery renewal at a higher rate strengthens the case for a fixed payment.
- You can put 10% downThe SBA 504 program removes the 25% to 30% down payment barrier that keeps most owners renting.
Not sure which side you land on? A 10-minute call usually settles it. 1-855-504-LOAN
How an SBA 504 loan changes the lease vs buy math
The biggest reason business owners keep leasing is the down payment. SBA 504 financing cuts it to 10% by combining three pieces of capital.
First lien (50%)
APC funds this directly. We're a private direct lender, not a broker. Term and rate quoted upfront.
SBA 504 / CDC (40%)
Second lien, fixed for 25 years through a Certified Development Company. Rates locked at funding.
Borrower equity (10%)
Cash down, retained equity in existing real estate, or seller carry-back in some cases.
On a $2 million building, the difference is $200,000 down instead of $500,000 or more. That $300,000 stays in your business as working capital while the property starts building equity from day one. Rates on the CDC portion are fixed for the full 25 years, so the payment you see at closing is the payment you make in year 24.
Lease vs buy questions, answered
It depends on how long you plan to operate in the space, how much capital you have available, and how stable your business is. As a rule of thumb, if you expect to stay five years or longer, buying usually wins because your payments build equity instead of disappearing as rent. This calculator puts real numbers on that tradeoff for your situation.
A conventional commercial mortgage typically requires 20% to 30% down. An SBA 504 loan reduces that to as little as 10% for owner-occupied property, because the financing is split between a first lien from a lender like APC, a second lien backed by the SBA through a Certified Development Company, and your equity.
The ownership side assumes a 25-year amortization at the fixed interest rate you select, with the property appreciating at a steady annual rate. Equity equals the projected property value minus the remaining loan balance. The lease side totals your rent over the same period, growing at the annual rent increase you select. The results are estimates for comparison purposes, not a loan quote.
Often the monthly cost is comparable. Most commercial leases are triple net, which means you already pay property taxes, insurance, and maintenance on top of base rent. When you own, you pay those same costs plus a mortgage payment instead of rent, and the principal portion of that payment goes into your own pocket as equity.
Rent is generally fully deductible as a business expense. When you own, you typically deduct mortgage interest, property taxes, and depreciation on the building, which can shelter a meaningful amount of income. Every situation is different, so review the specifics with your CPA before deciding.
Yes. That is exactly what the program is designed for. Your business must occupy at least 51% of the property, be a for-profit US business under SBA size limits, and show the ability to repay. Purchases, ground-up construction, and major renovations all qualify.
Like what the numbers say?
Schedule a 15-minute call and we'll turn your estimate into a real rate. No application fee, no obligation.