Lease vs. Own: How Each Affects a CRE Professional’s Portfolio

 August 5, 2021

By  Guy Gray

To lease or to own? That is the question for many commercial real estate professionals these days. While simple in theory, the answer is more complex than you might think and is tied to your unique portfolio, goals and desires as a commercial real estate professional. There are also a variety of little-known factors to think about.

Let’s take a look at the advantages and disadvantages each option offers to help guide your future CRE portfolio-related decisions.

Pros and Cons of Prospects Leasing

Commercial leases are popular among tenants. The renter can often use the property however they want, assuming it follows the lease agreement and has restrictions built into it. These types of leases typically vary from five-to-10 years in length. 

Here are some of the advantages leasing to tenants offers:

  • Fixed monthly revenues
  • Tax advantages
  • Equity builds over time
  • Flexibility for problem tenants
  • More control over the space

And here are some of the disadvantages to this option:

  • High expenses
  • Short-term revenue potential
  • Worse liquidity access

Pros and Cons of Prospects Owning

Selling your properties is a whole different prospect, but it’s common. As with leasing, your decision to lease or own depends on your preferences and goals. That being said, here are some of the advantages that selling properties to your prospects offers:

  • Large upfront payment
  • Potential immediate win, depending on margins
  • No insurance or upkeep required
  • Free up assets for further investments

And here are some of the disadvantages to this option:

  • Can’t build up equity
  • No asset value increases
  • Fewer tax breaks
  • Less control over the space

How CRE Software Helps with Both

Regardless of which route you take, an investment in technology is a wise decision. CRE software like Quarem can help you with your portfolio whether you lease or sell to your prospects. Here are some of the ways Quarem helps:

  • Save time and money keeping track of your leases and transactions
  • No data entry errors thanks to automated processing
  • Variety of reports and report templates for your desired investment method
  • Real-time market data to choose the right investment at the right time
  • Lease abstracting as part of the onboarding process, as well as data migration
  • Thorough training and ongoing support/management

If you’d like to see how Quarem can help your CRE portfolio, request a demo of the tool today.

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About the author 

Guy Gray

Guy Gray serves as Chief Operating Officer overseeing our technology and client services teams. He is responsible for guiding Quarem application development, networking and security, as well as new client implementations.

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