Leasing vs Purchasing model

Anonymous Monkey's picture
Rank: Chimp | 0

Hi All,

Was wondering if anyone with any PE experience could help me understand if there is any benefit to either model in terms of valuation?

Granted we have lower CapEx under a lease model vs purchasing outright but is there anything that favours either or?

Comments (8)

  • IS9019
  •  Aug 12, 2019


Aug 16, 2019

This isn't nearly enough information to determine what you are trying to do. Leasing or purchasing what? Land?

  • IS9019
  •  Aug 16, 2019

Serviced apartments lets say. Company currents purchases all its units and rents them out.

Consequences for moving to a lease model where they let the apartments and then rent them out further.

Aug 16, 2019

So weighing the decision of purchasing all of the units then leasing them out versus master leasing the units then sub-leasing them?

  • IS9019
  •  Aug 16, 2019

Precisely. Any real long term benefits?

I thought reduced CapEx but is this outweighed by increased interest expense?

Aug 16, 2019

There's an enormous difference in residual value/exit. Purchasing the units allows you to sell the land/improvements while master leasing the units may allow you to sell the leasehold and associated venture income stream but this would be capitalized at a much lower income multiple.

    • 1
  • IS9019
  •  Aug 18, 2019

Right thank you

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Aug 18, 2019
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