Real estate leasing - competition for a mortgage loan

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Leasing is currently in Poland - next to loans - one of the most popular financial tools. Vehicles are most often obtained in this way in the company, and less often machines.Relatively few people consider leasing when it comes to acquiring real estate. Meanwhile, wrongly, because it is a serious alternative to a loan, with undeniable advantages. Read what real estate leasing is.

What is real estate leasing?

The basic definition of a lease specifies that it is an agreement in which one party (lessor) enables the other party (lessee) to use a specific item against payment. It is worth remembering that in accordance with the provisions of the Civil Code, the leasing contract may only apply to tangible things, not intangible assets. The latter may be lent on analogous terms, but will be governed by unnamed contracts in the light of the Civil Code.

Property leasing applies to various types of buildings - production, commercial, service and even residential. The owner of such a facility, i.e. the lessor, undertakes to hand it over to the lessee. The lessee, on the other hand, pays the fees specified in the contract in return for the use. At first glance, such an action may resemble a lease, but it differs from it in quite an important detail. The lease agreement does not provide for the transfer of ownership to the premises, while the lease agreement does not provide for the transfer of ownership.

The moment of transfer of ownership depends on the leasing model chosen by the parties. There are two options to choose from - operational leasing and financial leasing. In the first case, it is assumed that the subject of the lease agreement remains in the lessor's property for the duration of the contract - it is still its fixed asset. The lessee may buy out and formally transfer the property to its fixed assets register only after the end of the contract period. On the other hand, in the case of financial leasing, the real estate becomes the lessee's fixed asset at the time of concluding the contract. On his side, it will be necessary to make depreciation write-offs of the building, while the buyout takes place automatically with the payment of the last leasing installment.

An interesting, although relatively unpopular option, is also the real estate leaseback. The transfer of ownership is the opposite of the first two options - from the lessee to the lessor, which in this arrangement is most often the leasing company. Despite reselling the property to the lessor, the current owner reserves the right to use the building or premises. This is a good way to "unfreeze" cash, which can be useful in the company, while maintaining the possibility of using the existing fixed asset of the company.

Advantages and disadvantages of real estate leasing

As mentioned at the beginning, real estate leasing is one of the options that allows you to purchase real estate for a company that does not have adequate own resources. Its biggest "competitor" is a mortgage loan, which, however, in some respects is far behind leasing.

The basic advantages of real estate leasing emerge precisely when it is compared to a mortgage loan. It is about formalities that are much less complicated in the case of leasing. Leasing is a more accessible method of financing the acquisition of real estate, it is also characterized by a shorter waiting time

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decisions. It is also worth paying attention to the fact that the leasing contract does not affect the creditworthiness of the entrepreneur, because it is not treated as a repayment obligation. Thus, the decision to lease the property leaves more room for maneuver if the entrepreneur would like to obtain a loan to finance other investments.

The tax issue is also an advantage of leasing real estate. As indicated earlier, depending on the form of leasing (financial or operating), the costs may include leasing installments or depreciation write-offs with interest installments. In such a situation, the expenses incurred for leasing reduce the entrepreneur's tax base, thus also reducing the value of the income tax necessary to pay. If only real estate is essential in the company, it may turn out that leasing it is really a worthwhile game.

The advantage of leasing is - also the aforementioned - the possibility of transferring ownership rights. Theoretically, if the company does not have the funds to buy the premises, it can always rent it. It is worth noting that when renting, you invest in a building belonging to someone else, financing its maintenance and allowing him to earn money, without any benefit to the landlord himself. In the case of leasing, of course, we also allow the lessor to earn (this is what this form, assuming a mutual profit, is all about), while the costs incurred by the entrepreneur constitute an investment in real estate, which by definition is already or after the end of the contract, will become his property.

Unfortunately, real estate leasing is not only an advantage - there are certain limitations that narrow the circle of potential lessees. In the case of real estate leasing, professional lessors (banks, leasing companies) impose a limit on the minimum value that the real estate must achieve in order to be purchased in this form. There are no such limitations for loans, which means that the sector of micro and small enterprises will often not have a choice between real estate financing methods.

In summary, it can be considered that real estate leasing is a good idea for companies that already have a fairly stable situation on the market, but do not have the funds to buy a building or premises on their own. In addition to classic leasing, it is also possible to obtain funds through the real estate reverse leasing mechanism, in which the right to use the building remains with the seller.