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SRExample situation: Buying Our Own Premises Instead of Renting
Question
“We pay 6,000 euros a month in rent for offices and employ 35 people. We have been offered an office for 600,000 euros. We have 250,000 euros in cash and could take a loan for the rest. Should we buy the premises?”
What to question
How much more or less does buying cost the company than renting over ten years? How much cash is left as a reserve after the purchase? Will this space still suit us in five years?
How the depth changes
Focused → broader → deepest
Four perspectives quickly separate an investment in property from an investment in the business: what buying would cost us compared with renting over…
Four additional perspectives question the assumption that buying always pays off more than renting, model a scenario in which revenue falls while the…
Four additional perspectives test the economics of buying under different interest and property price scenarios, alternatives (a shorter lease with a…
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