Real Estate Leasing

Real estate leasing is a financing alternative in which a property is not purchased but is used in exchange for regular lease payments, without the user acquiring economic ownership. The lessor (usually a leasing company or bank) purchases the property and makes it available to the lessee for a fixed term. At the end of the term, the lessee may purchase the property at a predetermined residual value, extend the contract, or return the property. Real estate leasing is almost exclusively used in the commercial sector.

How It Works and Types of Contracts

In finance leases-the most common form-the lessee bears the economic risk of the property (maintenance, insurance) but does not hold legal title. The lease payments include principal repayment, interest, and a margin for the lessor. In operating leases (rare), the risk and maintenance remain with the lessor, and the contracts are shorter and more flexible. Real estate lease contracts typically have terms of 10 to 30 years and are tailored to the lessee’s specific usage needs.

An important feature of real estate leasing is the sale-and-lease-back variant: A company sells a property already in its portfolio to a leasing company and immediately leases it back. This method creates immediate liquidity without interrupting business operations. It is frequently used by companies that wish to free up capital from tied-up real estate assets.

Accounting and Tax Aspects

The key difference from a bank loan lies in accounting treatment: In real estate leasing-provided it qualifies as an operating lease-the property does not appear on the lessee’s balance sheet (off-balance-sheet effect). However, under IFRS 16 (mandatory for international groups since 2019), lease liabilities must also be recognized on the balance sheet, which has significantly limited this accounting advantage. For tax purposes, lease payments are deductible as business expenses under certain conditions. The tax classification requires a detailed review in accordance with the BMF leasing decrees.

The tax treatment of real estate leasing is complex and depends on who is considered the economic owner. If the lessee holds economic ownership (so-called full amortization lease), they must capitalize the property on their balance sheet and depreciate it. Anyone considering real estate leasing should definitely consult a tax law specialist.

Real Estate Leasing as an Alternative to Traditional Financing

Real estate leasing can be attractive for companies looking to preserve their liquidity and credit lines. It is particularly suitable for office buildings, production facilities, logistics properties, or branch locations of large retail chains. In the private sector, real estate leasing plays no significant role, as the tax advantages for private individuals do not apply and a traditional mortgage loan is usually more cost-effective.

The advantage over a rental solution lies in planning security: The lessee knows their terms for the entire term and generally has the option to purchase the property at the end for a predetermined residual purchase price-which facilitates strategic location planning.

Practical Tip for Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, it is primarily medium-sized companies in the manufacturing and service sectors that use real estate leasing for business buildings and logistics space. Entrepreneurs looking to buy or lease commercial real estate should carefully weigh their decision with the input of tax advisors, financial advisors, and experienced commercial real estate brokers.

Particularly in the discussion of buying vs. leasing vs. renting, strategic aspects play a role alongside costs: How long will the location be used? Should the property remain in ownership long-term? How much liquidity is required for the operational business? At my-home.de, we assist commercial property seekers in the region and can provide initial assessments of the advantages of various usage concepts.

Frequently Asked Questions

What is the difference between real estate leasing and renting?

With renting, the landlord remains the owner and generally bears the primary maintenance obligations. With real estate leasing, the lessee (like a buyer) bears the financial risks of the property but has no right of ownership. In addition, leasing is generally structured to allow for the purchase of the property at the end of the term.

Is real estate leasing also available to private individuals?

Theoretically yes, but in practice it doesn’t make sense: Private individuals cannot deduct lease payments as business expenses and generally receive better terms through a traditional mortgage loan. Real estate leasing is a tool for corporate financing.

What happens at the end of the real estate lease agreement?

Depending on the terms of the agreement, the lessee can purchase the property at its residual value, extend the agreement, or return the property to the lessor. The option and the residual purchase price are contractually specified and must comply with tax requirements.

What are typical lease payments for real estate leasing?

The lease payment depends on the property value, the term, the agreed residual purchase price, and current interest rates. It is generally comparable to the annuity payment on a mortgage loan but also includes the lessor’s margin. A direct comparison between leasing and loan financing requires an individual calculation that takes the tax situation into account.

What role does real estate leasing play in equity optimization for small and medium-sized enterprises in Nuremberg?

For small and medium-sized enterprises in the Nuremberg metropolitan region-particularly those in the mechanical engineering, medical technology, and logistics sectors-real estate leasing offers a way to liquidate commercially used real estate assets without giving up the location. A company that owns its own production facility and needs capital for investments in machinery or digitalization can sell the facility to a leasing company and immediately lease it back (sale-and-lease-back). The released capital is immediately available for operational investments, while business operations at the location continue unchanged. However, by selling the property, the company forfeits the opportunity for its value to appreciate-a trade-off that must be calculated on a case-by-case basis.

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