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Should I buy the building or keep renting?
Buying converts rent into a payment plus every cost the landlord used to absorb, and converts liquid working capital into an asset you cannot spend.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
Should I buy the premises my business operates from, or keep renting and put the cash into the business?
Buy when the property cost is close to your rent, you will occupy it for a decade, and the cash for the injection is genuinely surplus. Keep renting when that cash earns more inside the business than the property returns — for a working capital business turning inventory several times a year, it usually does by a wide margin. The comparison is not payment against rent: it is ten years of total owner cash out, less equity built, against ten years of rent, with the injection's alternative return set beside it.
Buying replaces a rent payment with a mortgage payment plus property tax, insurance, roof, parking lot and every other cost the landlord currently absorbs and prices into your rent. It also converts liquid cash — the injection and the closing costs — into an asset that cannot be spent, drawn on quickly, or redeployed when the business needs money.
That conversion is the decision. The payment comparison everyone starts with is close to irrelevant, because it compares one line item against one line item and ignores both the cash going in and the equity coming out.
Where buying wins over ten years
- Ten years of rent: $1,169,316.
- Ten years of ownership: payments of $7,542.87 a month, $905,144, plus owner costs at an illustrative 2% of value a year, $220,000, plus $154,000 of cash at closing. Total $1,279,144.
- Equity at year ten with the value flat: $303,509.
Net, owning is $193,681 ahead across ten years — and that assumes no appreciation at all, while rent escalates every year. On the property comparison alone, buying wins.
Two program points belong in the arithmetic. Owner-occupied commercial real estate can often be financed under government-backed programs with a lower injection than conventional lending requires, subject to occupancy thresholds that differ for existing buildings and new construction. Confirm the current requirements against the program documents at sba.gov rather than a summary.
Where renting wins
- Gross margin generated: $110,880 a year.
- Net of the incremental cost of selling it — call it half — $55,440 a year.
- Over ten years: $554,400.
Against the property's $193,681 advantage, that is $360,719 better spent inside the business. And it stays liquid: inventory converts back to cash, a building does not.
This is the case owners systematically get wrong, because the building feels like an investment and the inventory feels like an expense. For a business whose capital turns several times a year at a real margin, the working capital is the higher-returning asset by a distance.
What owning changes that has no number
Do not compare the payment to the rent
Three numbers belong in the comparison and the payment is only one of them.
- Total cash out over your realistic holding period — payments, taxes, insurance, maintenance, and the cash at closing.
- Equity built, at a flat value. If the case only works with appreciation, it is a property speculation with a business attached.
- The alternative return on the injection, computed from your own turns and margin.
Run all three over ten years. If you will not be there in ten years, run it over the period you will be, where closing costs and the slow early amortisation hurt much more.
The questions that settle it
- Will I occupy this building in ten years? If the honest answer is no, the transaction costs at both ends probably eat the advantage.
- What does $1 of working capital return in my business, annually? Turns multiplied by margin, net of the cost of selling. That is the number the building must beat.
- What is the total cash at closing, including everything? Injection, closing costs, reserves the lender requires, and the moving and fit-out costs nobody budgets.
- What happens to my borrowing capacity afterwards? A mortgage payment sits in every future coverage calculation, and the building's equity is not available quickly.
What to ask for, and what to refuse
Ask for a full operating-cost history on the building — tax bills, insurance, utilities, repairs for the last three years. A seller who will not produce them is telling you something.
Ask your lender to quote the same purchase under more than one structure, and to state cash at closing, monthly payment, and payoff at year five for each.
Ask your landlord what a longer lease with a renewal option and a tenant improvement allowance would cost. It is the cheapest alternative to buying and almost nobody asks for it before starting a purchase process.
Refuse to buy with your operating reserve. Refuse a comparison that puts the mortgage payment next to the rent and stops there. And refuse a purchase that only works if the property appreciates — if you want property exposure, that is a separate decision made for separate reasons, and it should not be financed by your working capital.
Where this applies
Related questions
Should I buy the premises my business operates from, or keep renting and put the cash into the business?
Buy when the property cost is close to your rent, you will occupy it for a decade, and the cash for the injection is genuinely surplus. Keep renting when that cash earns more inside the business than the property returns — for a working capital business turning inventory several times a year, it usually does by a wide margin. The comparison is not payment against rent: it is ten years of total owner cash out, less equity built, against ten years of rent, with the injection's alternative return set beside it.
Which funding products does this apply to?
Term Loan, SBA Loan. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Is this specific to restaurants?
It is written around how a restaurant business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
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