Multi-Factor Lease vs. Buy Analysis

Should you lease your space — or buy it outright?
The math is more nuanced than you think.

Most lease-vs-buy comparisons stop at "what's the mortgage payment versus the rent?" That's not the question worth answering. The real question is: over your actual hold horizon — after taxes, after depreciation recapture, after every operating cost that both sides will actually pay — does owning leave you better off, and by how much?

Tenant representation only. Confidential. Your data is never shared with landlords, lenders, or sellers.

What most spreadsheets miss
7 of 13
of the operating cost categories that determine the real economics — opportunity cost on tied-up equity, separate insurance escalation, planned capex events, HOA dues, prepayment penalties, depreciation recapture at sale, and Arizona's combined primary + secondary property tax — are routinely left out of side-by-side comparisons. We model every one.
What this tool surfaces
NPV spread (lease vs. buy), breakeven sale year, sensitivity band across discount rate / residual value / hold horizon, isolated tax-optimization deltas (cost segregation, §163(j), 1031 exchange) with deferred liability surfaced honestly, and a hedged recommendation when the outcome is close.

Why most lease vs. buy analyses fail

Four reasons the wrong answer gets defended in the boardroom.

01
The opportunity cost of your equity is real money.
Your down payment isn't free — it's capital you could have invested elsewhere earning your hurdle rate. Most spreadsheets ignore this. Over a 7–10 year hold, that single omission can swing the analysis by hundreds of thousands of dollars and reverse the conclusion entirely.
02
Arizona property tax has two bills, not one.
Maricopa County (and every Arizona county) bills commercial owners a primary tax AND a secondary tax. The secondary covers voter-approved bonds and overrides and runs uncapped, while Prop 117 limits the primary at 5% annual growth on assessed value. Capturing only the primary line typically understates the property tax calculation by 15–30% — a gap that compounds materially over a 7–10 year hold.
03
Planned capex isn't optional. It's a calendar.
The roof on a Class B office has a finite life. So does the HVAC, the elevator, the parking lot resurface. When you buy, those costs hit your books on a known schedule. We model each as a real cash outflow in the year it occurs — and we tell you whether capitalized depreciation tax shields offset the hit or not.
04
The base case is only half the question.
Once you know what owning costs on default tax assumptions, the next question is what tax planning is worth. Cost segregation, the §163(j) interest cap, and the 1031 like-kind exchange each move the buy-side NPV by real money — and they stack. We quantify each as an isolated delta against the same base case, so the decision is informed by numbers, not slogans.

Tax decisions, quantified

Three tax planning decisions. Three real numbers.

Most lease-vs-buy comparisons treat the tax line as a single average rate and walk away. We don't. We model three specific tax decisions you'll actually face if you buy — each as an isolated dollar delta against the same base case, so you can see what each one is worth on its own and what they're worth together.

Decision 01
Cost Segregation
Reclassify components of your improvement basis into shorter-life depreciation categories. The result is front-loaded depreciation deductions and a present-value tax shield. We compute the NPV delta against straight-line depreciation, so you can see exactly what a cost seg study is worth on this specific deal.
Engine output: isolated NPV delta versus base case.
Decision 02
§163(j) Interest Deductibility
Since the TCJA, business interest deductions are capped at 30% of Adjusted Taxable Income. When ATI is tight, that cap bites — disallowed interest carries forward but you've lost time-value on the deduction. We model the cap year by year and tell you what it actually costs on this transaction, not what the textbook says.
Engine output: isolated NPV delta and carryforward balance at horizon.
Decision 03
Exit Strategy — Taxable Sale vs. 1031 Exchange
A taxable sale at horizon triggers federal depreciation recapture, federal capital gains, and Arizona long-term capital gains tax. A 1031 like-kind exchange defers all three. We quantify the deferral as a present-value benefit and surface the deferred liability as an honest memo line — because deferred is not the same as avoided.
Engine output: isolated NPV delta plus deferred tax liability disclosed separately.
One important note. Tax decisions modeled here, though intricate, are starting points for conversation with your CPA, not substitutes for advice. Your specific tax position, entity structure, and state filings all change the math — and a qualified tax professional should sign off before any of these strategies are deployed on a live transaction.
Two ways to get started.
Walk through the five-step form below and we'll compile your inputs into our proprietary analysis tool — or skip straight to the contact form if you'd rather schedule a call before sharing numbers. Either path works.
Step 1 of 5 — Select your property type
Office
Class A/B/C · Traditional · Creative · Suburban
Medical Office
MOB · Clinical · Dental · Specialty Practice
Flex / R&D
Mixed Office-Warehouse · Light Industrial · Lab
Industrial
Distribution · Manufacturing · Cold Storage · Last Mile

* Owner-occupied semiconductor fabrication, DOD/SCIF facilities, and heavy manufacturing require preliminary screening questions. Use the contact form below to schedule a call.

1
Property & Sector
2
Lease Economics
3
Buy Economics
4
OpEx & Capex
5
Contact

Property type, size, location, and horizon.

Start with the basics. These four answers shape every cost assumption that follows. Sector is captured above; pick the rest below.

Target size you're solving for.
How long do you realistically plan to occupy this space? This drives the analysis horizon and the sale-year sensitivity range.

Lease side — what would renting this space cost?

If you've gotten proposals or RFP responses, use those numbers. If not, give your best estimate of asking-market terms. Defaults reflect current Phoenix Class A office; adjust to your situation.

First-year base rent before escalation.
Phoenix office: 2.5–3.5% is typical.
NNN/MG: estimated landlord pass-through. FSG: leave blank.
Tenant improvement allowance from landlord.
Months of free or abated base rent.
If TI doesn't cover full buildout cost.
Moving, IT, signage, downtime — total one-time cost.

Buy side — what would acquiring this space cost?

If you have a target building in mind, use its specifics. If you're shopping the market, use a representative asking price and lender quote. Phoenix small-balance commercial financing typically runs 25% down, 25-year amortization, 7–8% on a 5–10 year balloon.

Total acquisition price for the building.
Phoenix SBA-504: 10–15%. Conventional: 25–35%.
Current market rate.
Typical: 20–25 yrs.
When loan balances due.
One-time cost to make the space usable for your operations.
Same one-time move cost as the lease side, captured separately.
Annual property value growth at exit.
Broker fees, closing costs, transfer taxes at sale.
Loan early-payoff fee, if applicable.
Title, escrow, inspection, financing fees.

Operating costs, planned capex, and your tax profile.

This is where most analyses go wrong. Property tax in Arizona has two parts — be sure to enter the combined estimate. Planned capex events (roof, HVAC, parking lot, elevator) are unavoidable when you own. Your effective tax rate and cost of capital determine which side wins by how much.

Office — typical considerations
Most office capex over a 7–10 year hold falls into roof, HVAC, parking lot resurface, and elevator modernization. Plan around the building’s known systems and ages.
Buy-Side Operating Costs
Primary + secondary combined. Maricopa County: pull both columns from the assessor.
Prop 117 caps primary at 5%. Secondary can run higher.
Property + liability + flood (if applicable).
Phoenix commercial insurance has risen faster than general OpEx — override here if you have a recent quote trend.
Ongoing maintenance budget. Class A: $1.00. Class B/C: $1.50–2.50.
Office park or condo association dues, if applicable.
Planned Capex Events (up to 3)

Known capital expenditures you'll face during ownership — roof replacement, HVAC, parking lot resurface, elevator modernization, etc. Capitalize = depreciated over time. Expense = full deduction in year of spend.

Tax Profile
Federal + Arizona state combined effective rate.
Your internal hurdle rate — what your capital earns elsewhere.

Where do we send the analysis?

Fill in as much as you can along with your contact details. We'll respond within one business day and help you evaluate your options with the full analysis in hand.

Captured so far
Complete the prior steps to see your summary preview here.

Lease vs. Buy analysis — we'll review your inputs, run the full multi-factor model, and follow up to walk you through the result.

What we deliver

We don't email you a verdict. We sit across the table and work the decision live.

A lease-vs-buy decision is too consequential to settle in three rounds of email and a PDF attachment. The right answer almost always shifts once we test it against your actual numbers, your real hold horizon, and the variables you didn't think to flag. Every Maris Advisors engagement starts in your conference room — and continues through whichever side wins.

Stage 01
Decide
In your conference room. With your team. Live. We come to you, load your numbers into our NPV-based analyzer, and work the decision in real time. Test a different purchase price, a different rate, a different hold horizon, a different residual value — we re-run it on the spot. Your CFO sees the sensitivity band shift as the assumptions change. By the end of the meeting, you have a defensible answer, a hedged recommendation when the call is close, and a branded PDF for the board. No three more rounds of email. The decision gets made in the room.
Stage 02 — If Lease Wins
Lease
Full tenant representation through execution. The same engine that decided lease-vs-buy now drives renewal-vs-relocate, RFP issuance and scoring across multiple buildings, side-by-side economic comparison, lease analyzer review of every clause from your perspective, and LOI generation. We pre-fill the next tool with what we already learned about your space requirement. You never restart from zero. Same advisor, same model, same standard — from "should we lease?" to "the lease is signed."
Stage 03 — If Buy Wins
Close
ClearPath Purchase Engine™ takes you to close. Our proprietary acquisition platform integrates Preliminary Title, Building Physical Inspection, Environmental Investigation, ALTA Survey, and Phase I findings into a single live financial model. The moment a defect is flagged, your Risk-Adjusted Valuation updates, your Deal Health Score recalculates, and a three-option Negotiation Playbook gets drafted before your earnest money goes hard. Institutional brokers send you a PDF summary of the problem. We send you the objection letter. Tenant and buyer representation only. No landlord side. No seller side. Ever.

This isn't three engagements stitched together — it's one continuous service. The decision tool you're filling in right now is the front door to the whole platform. Whether the answer is lease or buy, you stay with the same advisor through close.

Direct Access

Talk to Maris Advisors.

480-625-9059

sbordley@marisadvisors.com

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32 years of corporate consultancy. Serving tenants locally and nationwide. No landlord clients. No exceptions.