purchase of the existing franchise location, 12% cash equity from the buyer
Own vs. Lease
Below is an example illustrating the cost comparison between owning versus leasing a property
Own
| Size (Square Feet) | 10,000 |
| SBA Guarantee & Packaging Fees | $53,000 |
| Total Project Cost | $2,053,000 |
| 10% Down Payment | $200,000 |
| Loan Fee/Cost | (Financed) |
| Total Start-Up Costs | $200,000 |
| PSF | Total | |
|---|---|---|
| Mortgage Payment (P&I) | $1.28 | $12,803 |
| Operating Expenses | $0.10 | $1,000 |
| Propery Taxes | $0.21 | $2,083 |
| Total Monthly Costs | $1.59 | $15,886 |
| Tax Benefits | |
| Interest Deduction (10 yr Avg.) | $3,3673 |
| Operating Expense Reduction | $390 |
| Propery Tax Deduction | $813 |
| Depreciation Benefit | $252 |
| Other Benefits | |
| Rental Income | $0 |
| Avg. Appreciation | 2.0%/$3,422 |
| Total Ownership Benfits | $8,549 |
| Total Effective Monthly Cost | $7,337 |
Lease
| Size (Square Feet) | 10,000 |
| Lease rate per sq ft/mth NNN | $1.00 |
| Monthly Lease | $10,000 |
| Prepaid Rent | $10,000 |
| Security Deposit | $10,000 |
| Total Start-Up Costs | $20,000 |
| PSF | Total | |
|---|---|---|
| Lease Payment | $1.00 | $10,000 |
| Operating Expenses | $0.10 | $1,000 |
| Propery Taxes | $0.21 | $2,083 |
| Total Monthly Costs | $1.31 | $13,083 |
| Tax Benefits | |
| Lease Deduction | $3,900 |
| Operating Expense Reduction | $390 |
| Propery Tax Deduction | n/a |
| Depreciation Benefit | n/a |
| Other Benefits | |
| Rental Income | $0 |
| Avg. Appreciation | 2.0%/$333 |
| Total Lease Benfits | $4,623 |
| Total Effective Monthly Cost | $8,460 |
| Annual Effective Cost Difference | $13,474 |
| Average Annual Princpal Pay down | $40,623 |
| Annual Wealth Creation | $54,097 |
| 15 Year Wealth Creation | $811,460 |
The above is a sample scenario for discussion purposes only. Actual costs will vary for each property based on a variety of factors such as market lease rates, property tax rates of that county, per sf sale price of property, etc
