Buying usually makes sense when your business is stable, expects to stay in one location for many years, and can commit capital without straining operations. You gain equity, control and steadier occupancy costs. Leasing usually wins when growth is uncertain, your time horizon is short, or cash earns more inside the business. Financing, property taxes and timing tip the balance.
Owner-users have a financing path built for them. The U.S. Small Business Administration's 504 loan funds owner-occupied commercial real estate, with borrower down payments typically as low as 10%, and the business must occupy at least 51% of an existing building or 60% of new construction (U.S. Small Business Administration, 504 Loan Program).
What does a business gain by owning its building?
- Equity. Loan payments build ownership instead of paying a landlord's mortgage.
- Control. You decide on renovations, signage, layout and how the property is maintained.
- Cost stability. A fixed-rate loan replaces annual rent escalations and renewal negotiations.
- No relocation risk. A landlord cannot decline to renew, redevelop the site or lease your expansion space to someone else.
What does owning cost a business?
- Capital. The down payment, closing costs and any renovation draw cash that could fund hiring, equipment or inventory.
- Concentration. The business and its real estate now rise and fall together, along with the owner's net worth.
- Less flexibility. Moving to a bigger or better-located space means selling or leasing the building first.
- Every repair is yours. Roofs, HVAC, parking lots and code upgrades no longer belong to a landlord.
How does an SBA 504 loan work for owner-users?
The 504 program splits the purchase into layers (U.S. Small Business Administration, 504 Loan Program):
- Bank first lien: roughly 50% of the project.
- Certified Development Company second lien: roughly 40%, backed by the SBA.
- Borrower down payment: typically as low as 10%, more for startups and special-purpose property.
The occupancy rule is the key test: at least 51% of an existing building, or 60% of new construction, must be used by your business. Eligibility, rates, fees and terms depend on your business and the lender, so speak with an SBA lender and your CPA early. We can introduce you to lenders familiar with the program.
How do Texas property taxes change the math?
When you lease, property taxes often arrive folded into rent or operating expenses. When you own, the bill comes to you, and it moves with each year's appraisal and local tax rates.
Two points matter right now. First, Texas limits annual appraised-value increases on non-homestead real property, including commercial buildings, valued at about $5.32 million or less for 2026. That 20% cap covers tax years 2024 to 2026 and expires December 31, 2026 unless the Legislature extends it (Texas Tax Code 23.231). A building whose value has been held down by the cap could see a larger jump in 2027. We cover the details in what happens when the Texas 20% property tax cap expires.
Second, as the owner you control the protest. Owners generally must file by May 15 or 30 days after the appraisal notice is delivered, whichever is later (Texas Comptroller of Public Accounts, Property Taxpayer Remedies). Business personal property renditions are generally due April 15 whether you own or lease (Texas Comptroller).
When does leasing make more sense?
Leasing is often the stronger choice when:
- Headcount could double or halve in the next few years
- You expect to stay fewer years than it takes to recover purchase and sale costs
- The location that suits your customers or employees is not one you could buy into
- Cash is scarce or would earn more in the operating business
- You prefer a landlord to carry building risk and capital repairs
Can I buy a building with extra space and lease it out?
Yes, and for many owner-users it is the best of both. A building larger than you need today gives you room to grow, while rent from tenants in the remaining space helps cover the loan and expenses. Under the SBA 504 occupancy rule, your business must still use at least 51% of an existing building, so the leasable portion has a limit if you use that program.
The trade-off is that you become a landlord, with leasing, vacancy and tenant management to handle. The Agency Dallas Commercial Division helps owner-users buy their own building across Dallas-Fort Worth, including buildings with room to lease to other tenants. If you later sell and buy another business or investment property, a 1031 exchange may defer tax; our post on how a 1031 exchange works in Texas explains the timeline, and a qualified intermediary and CPA handle the mechanics.
How should I compare the two options?
Put both paths on paper over the same time horizon:
- Estimate how long you will stay and how much space you will need.
- Total the lease cost over that period, including escalations and operating expenses.
- Total the ownership cost: debt service, taxes, insurance, repairs, and the return your down payment could earn elsewhere.
- Estimate the building's value at the end and the cost to sell.
- Review the results with your CPA and lender before you decide.
Many owners hold the building in a separate entity and lease it to the operating company. Whether that fits your situation is a question for your CPA and attorney. To start the real estate side, visit our Commercial Division.
How can our Commercial Division help?
If you are weighing a purchase against your next lease, send us the property type you need, the locations that work for your team and customers, and your size requirement or budget. We will follow up within one business day with buildings to purchase and lease options to compare side by side. The Agency Dallas Commercial Division represents owner-users and tenants throughout North Texas. Start on our Commercial Division page or call (469) 839-6020.
Frequently asked questions
How much down payment do I need to buy a commercial building?
It depends on the loan. Under the SBA 504 program, borrower down payments are typically as low as 10% for owner-occupied property, with more required for startups and special-purpose buildings. Conventional commercial loans often require more. An SBA or commercial lender can tell you what your business qualifies for based on its financials and the property.
Can I use an SBA 504 loan to buy an investment property?
No. The 504 program is for owner-occupied commercial real estate. Your business must occupy at least 51% of an existing building or 60% of new construction. You can lease the remaining space to other tenants, but a building purchased purely to rent to others does not qualify. Confirm eligibility details with an SBA lender.
Is it better to buy or lease if my business is growing fast?
Rapid growth usually favors leasing, or buying a building with extra space you can grow into. A building that fits today may be too small in a few years, and selling it to move can be slow and costly. Leasing with expansion rights or a termination option keeps you flexible until your space needs settle down.
Will my property taxes go up if I buy?
They may change, and as the owner you pay the full bill directly. Taxes depend on the appraisal district's value and local rates each year. A purchase can prompt a fresh look at value, and for buildings valued at about $5.32 million or less, the 20% cap is scheduled to expire after 2026. Budget conservatively and ask a CPA to review.
Who should I talk to before deciding?
Start with three advisors: a CPA, to compare the after-tax cost of owning and leasing; an SBA or commercial lender, to confirm what you can finance; and a commercial broker, to show what is actually available to buy or lease in your target areas. An attorney should review any purchase contract or lease before you sign.
Sources
- U.S. Small Business Administration, 504 Loan Program
- Texas Tax Code Section 23.231, limitation on appraised value of certain non-homestead real property
- Texas Comptroller of Public Accounts, Property Taxpayer Remedies
- Internal Revenue Service, Like-Kind Exchanges Under IRC Section 1031
Verified October 2026.
