Real Estate versus Equipment Leases
The Similarities and Differences between Real Estate and Equipment Leases.
Real Estate Leases are from Jupiter.
Equipment Leases are from Saturn.
Get Access to the eBook
Understanding the Key Differences
- Ownership and Organizational Models
- Rent Payment and Lease Structures
- Critical Dates at Middle and End of Term
- Size and Scale
Understanding the Similarities
- Accounting Treatment
- End of Term Options
- Lack of Investment and Prioritization
Similarities and Differences Between Real Estate and Equipment Leases
There are some similarities between real estate and equipment leases. Both have been neglected and under-funded at most organizations. There has been little investment in the people, systems, and processes to support real estate and equipment leases. Real estate has gotten more attention over the past decade with centralized organizational models and new technologies such as integrated workplace management systems, but these new approaches have been limited primarily to large organizations. Equipment leases are not even recognized by most CFOs as a portfolio at most companies.
There are also many similarities between the accounting for both real estate and equipment leases. Both can have initial direct costs; fixed or variable rents; and end-of-term options to purchase, extend, or terminate. However, as you drill down, there are some important differences that become apparent when you are selecting a software vendor for lease accounting. For example, equipment leases often have multiple assets per schedule, whereas real estate leases typically only have one.