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Pepperlot

Restaurant real estate · Planning tools

Restaurant lease vs. buy calculator

Compare the cost of leasing a restaurant space with owning the property over 5, 10, 15, 20, 25, and 30 years. Start with your numbers. See what changes over time.

Your property assumptions

Example values

All amounts in USD. Replace these examples with your quotes. All fields are required; use 0 when a cost does not apply.

Leasing the space
$ / month
%
$ / month

NNN / CAM: property taxes, insurance, and common-area costs passed on by your landlord. Enter only charges beyond base rent.

Purchasing the property
$
%
%
years
Build-out, operating costs & resale assumptions

These example costs are already included in your results. Review them before comparing a real property.

Additional lease costs
$
$
$
$ / year

Other tenant costs include insurance and repairs you pay separately. Do not repeat charges already included in NNN / CAM.

Additional ownership costs
$
% of price
% of initial price
$ / year
$ / year
%
% of future value
Both scenarios
%
%

The discount rate converts future payments and proceeds into present-day dollars. It affects the present-value rows only.

Your comparison

Look beyond the monthly payment.

Leasing · net cost$1,106,749
Purchasing · net cost$780,986

Cash paid minus the returned lease deposit or estimated net property sale proceeds at the end of the selected period.

Purchasing has a $325,764 lower modeled net cost over 10 years.

Upfront cash · lease$87,000
Upfront cash · purchase$380,000
Monthly purchase loan repayment$5,301
Estimated equity at year 10$629,244
Monthly occupancy · lease, year 1$7,500
Monthly occupancy · purchase, year 1$7,634

Loan repayment includes principal and interest during the loan term. Year-one monthly occupancy includes rent plus NNN / CAM and other tenant costs, or the loan repayment plus property tax, insurance, and maintenance. Upfront costs are separate. Loan repayments stop after the entered amortization period; ownership expenses continue.

Cumulative cash paid, before any sale

LeasePurchase

Cash totals exclude sale proceeds and deposit refunds. Exact values for every period are in the table below.

Planning estimates, before tax effects. Assumes a fixed-rate loan with no balloon payment and lease renewals at the same annual increase. How this is calculated

The longer view

One property decision. Six horizons.

See the cash commitment, remaining loan balance, and estimated value you could recover.

Estimated costs in USD, rounded to the nearest dollar. Each column assumes an exit at that year.
Cost or value5 years10 years15 years20 years25 years30 years
Lease · cumulative cash paid$564,822$1,118,749$1,760,902$2,505,334$3,368,334$4,368,787
Purchase · cumulative cash paid$846,706$1,337,090$1,854,922$2,404,573$2,991,113$3,302,365
Purchase · remaining loan$683,716$589,750$456,542$267,703$0$0
Purchase · estimated property value$1,104,081$1,218,994$1,345,868$1,485,947$1,640,606$1,811,362
Purchase · equity before selling costs$420,365$629,244$889,326$1,218,244$1,640,606$1,811,362
Purchase · selling costs$66,245$73,140$80,752$89,157$98,436$108,682
Purchase · net sale proceeds$354,120$556,104$808,574$1,129,087$1,542,170$1,702,680
Lease · net cost after deposit refund$552,822$1,106,749$1,748,902$2,493,334$3,356,334$4,356,787
Purchase · net cost after sale$492,587$780,986$1,046,348$1,275,486$1,448,943$1,599,685
Lease · net cost in present dollars$499,522$884,800$1,234,502$1,551,945$1,840,130$2,101,772
Purchase · net cost in present dollars$515,457$791,434$1,025,107$1,222,356$1,387,995$1,530,602

Equity is estimated property value less the outstanding loan. Net sale proceeds also deduct selling costs. A negative net cost means estimated proceeds exceed modeled spending; it is not a guaranteed return.

The trade-offs

Leasing vs. buying a restaurant property

The lower modeled cost is only part of the decision. Consider your cash reserves, location needs, and appetite for property risk.

Lease the space.

Keep more capital available for the restaurant.

Pros

  • Often requires less upfront cash than a property purchase.
  • Can preserve funds for staffing, equipment, and working capital.
  • Offers the option to relocate at lease expiry, subject to your agreement.
  • May include landlord-funded improvements or landlord responsibility for major repairs.

Cons

  • Rent payments do not build property equity.
  • Rent increases, renewal terms, and continued occupancy depend on the lease.
  • Alterations, signage, assignments, and subleases may require approval.
  • NNN charges, repairs, guarantees, and unrecovered build-out costs can add substantial risk.

May fit: a new concept, a shorter time horizon, or an operator prioritizing available cash.

Own the property.

Invest in the location behind the business.

Pros

  • Loan principal payments build equity as the debt is repaid.
  • Provides more control over the space, within zoning and other restrictions.
  • Can offer long-term occupancy stability without landlord renewal decisions.
  • May provide appreciation or future leasing opportunities, subject to market conditions and financing terms.

Cons

  • Down payment, closing costs, and improvements tie up cash.
  • The owner bears major repairs, property taxes, insurance, and capital expenses.
  • Property values can fall, and selling can take time and incur fees.
  • Debt, personal guarantees, rate changes, or balloon maturities can create financial risk.

May fit: an established operator with reserves, a long time horizon, and confidence in the location.

Know what’s included

How to compare restaurant occupancy costs

Compare equivalent spaces and separate the real estate decision from the cost of buying a restaurant business.

A restaurant lease vs. buy comparison starts with more than rent and a mortgage payment. Include build-out, recurring occupancy expenses, financing, and the money you may recover when you exit. Use actual lease proposals, lender terms, insurance quotes, and inspection findings wherever possible.

Leasing: what you pay to occupy the space

Lease cash paid includes your build-out less the landlord allowance, deposit, base rent, NNN / CAM, and other tenant costs. Rent increases once per year. Other recurring costs grow at your operating cost increase rate. Net lease cost subtracts the deposit, assuming it is fully returned at exit.

Purchasing: what you pay and what remains

Purchase cash paid includes the down payment, closing costs, build-out, monthly principal and interest, taxes, insurance, and maintenance or capital reserves. Estimated sale proceeds equal future property value minus selling costs and remaining debt. Net purchase cost subtracts these proceeds from cash paid.

Present value: compare dollars at the same point in time

The present-value rows discount monthly spending and end-of-period proceeds using your annual discount rate. Upfront spending occurs at month zero; recurring payments occur at each month-end. This gives a timing-adjusted comparison alongside the undiscounted totals.

Model assumptions and limits

  • Property purchase only: business goodwill, equipment purchases, operating revenue, staffing, and utilities are excluded unless you explicitly add relevant one-time costs.
  • Fixed-rate, fully amortizing debt. Payments stop at amortization end. No refinancing, balloon payment, prepayment penalty, or loan fees beyond entered closing costs.
  • Continuous occupancy and lease renewals at the entered rent increase. No free-rent periods, percentage rent, renewal fees, or downtime.
  • Build-out and the landlord allowance occur upfront. Build-out has no separate resale value.
  • Property tax starts as a percentage of purchase price, then grows with operating costs; local reassessment rules are not modeled. Maintenance reserves are treated as spent.
  • Each horizon assumes a sale and full lease-deposit refund. No taxes on sale, depreciation, income-tax deductions, or investment earnings on unspent cash. The discount rate is a timing assumption, not a separate investment account.
  • All defaults are illustrative, not market quotes or financing offers. Review the comparison with your broker, lender, and tax adviser before making a commitment.

A few things to know

Before you choose
a restaurant site.

Is it cheaper to lease or buy a restaurant space?

It depends on local rents, the purchase price, financing, recurring costs, how long you stay, and future property value. Leasing may use less cash initially. Buying may recover value at sale. Compare both cash paid and net cost across all six horizons rather than assuming one option always wins.

Does buying a restaurant mean owning its building?

No. A restaurant business sale can include operations, goodwill, or assets while the space remains leased. This calculator compares leasing a site with buying the real estate. Confirm whether a listing includes the property.

What should I include in NNN or CAM charges?

Use the additional occupancy charges in your lease proposal, such as passed-through taxes, insurance, and common-area maintenance. For gross rent that already includes these items, enter zero for those included charges. Put separately paid tenant insurance or repairs in other annual tenant costs.

Why does the calculator subtract sale proceeds?

A property can retain value after years of occupancy. Comparing all mortgage payments against rent without accounting for remaining property value can distort the result. The calculator shows cash paid separately, then deducts estimated sale proceeds after debt repayment and selling costs. Proceeds are uncertain and may be negative if the debt exceeds the sale value.

What if my commercial loan has a balloon payment?

This version assumes the entered interest rate and amortizing payments continue until the loan is paid off. It does not model a shorter loan maturity or refinancing. If your loan has a balloon, use a separate lender-reviewed cash-flow analysis before relying on a long-term comparison.

How do I compare a second-generation restaurant space?

Estimate the actual work each site needs, including the hood, grease interceptor, HVAC, fire suppression, accessibility, and permit requirements. Enter separate build-out costs for leasing and purchasing. Existing equipment can reduce some costs, but its condition and permitted use need verification.

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