We received this question via LinkedIn, and it’s another FAQ. And it often goes deeper into how to structure a lease for an assisted living facility or how to finance a purchase.
We’ll go deeper into these topics in other posts – stay tuned for a complete guide to leasing your assisted living facility and financing 101 for assisted living facilities.
The answer to whether you should lease or own is fairly simple but depends on your answer to a few other questions:
- How much capital do you have available?
- And, and what are your long-term plans?
For most small business owners of assisted living facilities, owning their real estate is almost always better than leasing. Ownership of the real estate gives them greater control and flexibility, and it helps them build equity and wealth for retirement.
So if you have enough capital for a reasonable down payment to buy your property and still have sufficient operating reserves, then purchasing is almost always right.
That is, unless your long-term plans are for rapid growth.
For a small business assisted living operator that wants to grow quickly, leasing may be the better option in the short run. This allows the operator to use investors’ capital to own the real estate while leaving the operators’ capital to fund start-up expenses and ongoing operations. Fast-growing companies burn more cash than they might expect so keeping capital in reserve will help make success more likely.
What if you don’t have enough capital to purchase your property? Then leasing isn’t the better alternative, it’s probably the only alternative. But that’s not necessarily a bad thing.
Leasing your property may help your company start sooner and grow quicker than if you own your real estate. The key is to lease in a smart way, a way that helps your business start and grow without excessive burden or limits.