Lease vs Buy?

One of the largest decisions facing non-profit organizations is the decision to lease or own the facilities in which they operate.  Leasing a property may provide the non-profit organization with flexibility in an environment of uncertainty, while owning the property would bring the organization greater stability and possible financial benefits.  The organization must take great pains to consider their options carefully.  They should forecast what future rents may be in their neighborhood, whether they have the capacity to handle the maintenance activities of ownership, and whether there are tax incentives given by their local municipality that may guide them towards leasing or owning.

However, in order to arrive at the best decision, according to an article on Nonprofit Quarterly, it is critical that the nonprofit understand itself and its mission before making any long-term obligations.  The financial factors alone cannot answer the question.  The organization must discuss what type of constituency they are looking to serve.  If they expect rapid and nationwide growth, leasing the property may be a better option so that they can dynamically adapt to their circumstances in the near future.  However, if the non-profit provides a service to an established community, buying the property may be the more attractive option.

Non profit organizations and social ventures are most successful when they are able to focus their operations down to where they have the highest comparative advantage, and where they can add the most value.  Non-profits that are just beginning should most likely shy away from the obligations of ownership, unless there are huge financial advantages to doing so.  Renting the property would allow the organization to move more freely if they develop a market in an region they had no anticipated.  Non-profits must decide whether they will buy or lease for all kinds of products and services with careful analysis, but it seems that there are more overall advantages to leasing for non-profits than buying, unless the non-profit is well established with a certain future