Free calculator · Real Estate
Own vs. Lease
Compares owning corporate real estate against leasing by treating ownership as an incremental investment, rent avoided plus the depreciation shield each year and after-tax sale proceeds at exit, solved to an IRR against the firm’s real estate hurdle. Inputs include annual rent, the tax rate, purchase cost, depreciable basis, recovery period, appreciation, hold period, and required return.
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
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Own vs. Lease
Lease & tax
Own / develop
Lease side
After-tax rent ($1,500,000 × 79%)
$1,185,000
PV of after-tax rent (10 yrs @ 4.74%)
$9,266,900
Own side, incremental investment
Annual depreciation shield
$129,231
Incremental CF / yr (rent avoided + shield)
$1,314,231
Year 10 sale (2.0%/yr)
$36,569,833
Gain tax (21% on $12,723,679)
$2,671,973
After-tax sale proceeds
$33,897,860
After-tax IRR of owning
5.39%
vs 8.00% hurdle
Verdict
LEASE
below the hurdle
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This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.