15 Years of Rent Payments That Could Have Bought a Building

A water company owner in Lake Havasu City has leased his commercial space for 15 years. He started at around a dollar per square foot and is now closer to $1.75 or $2. The building he has paid into all that time belongs to someone else.

Run the numbers backward, and you find a lesson most small business owners here learn too late. The buy-versus-lease decision for commercial space in Lake Havasu City is not about ambition. It comes down to timing, capital structure, and which numbers you run before the next renewal arrives.

Fifteen Years of Mortgage Payments Tell a Different Story

Picture a 15-year mortgage today and set it against 15 years of escalating rent. Imagine that same water company owner buying a building back then.

Commercial prices in Lake Havasu City now look like a different era. He would have locked in a fixed payment at a rate that seems almost impossible today. On a 15-year conventional loan, that building would be paid off right now, fully owned with zero mortgage.

Instead, his monthly rent has climbed from about $1 per square foot to nearly $2 per square foot. He is now looking at building on county land outside the city just to find relief.

The Buy Window Closes Before Most Owners Notice

Commercial rent in Lake Havasu City does not hold still for long. A lease that starts at $1 per square foot escalates with each renewal. Each cycle, the gap between owning and leasing widens a little more. The business grows into the space, moving becomes disruptive, the tenant stays, and the landlord raises the rent.

The buy option was most accessible early in the business lifecycle. Prices were lower, and rates were favorable, but the capital to act felt out of reach. So operators lease, and they keep leasing as the rent climbs and the window quietly closes.

Randy Shuffler has tracked this pattern across asset classes in the Lake Havasu City commercial market for over two decades. The math shifts with what you buy, how much capital you bring, and what the space must do for your business. But the underlying logic never really changes.

“If he could have bought a building back then, he would have gotten a really great loan before adjustable-rate products took over. It would have probably been paid off by now; they were doing 15-year conventional loans if you had enough money. He was just barely getting enough money to get going at that point.” Randy Shuffler, Founder and Principal Broker, Lake Havasu City Commercial at Realty ONE Group Mountain Desert

The phrase “barely enough money to get going” is the part most business owners recognize in themselves. Capital and timing rarely line up cleanly, which is the whole problem. That tension is exactly why running the numbers early, before the next renewal, matters.

Buying Does Not Always Pencil, and That Is Fine

Buying does not always win, and that is worth saying plainly. I work through this comparison with clients all the time, and the answer is not always ownership.

A restaurant operator eyeing a 4,000-square-foot downtown space might need $500,000 in tenant improvements just to make it functional. On a $2 million purchase with 20% down, the mortgage payment runs $7,500 to $8,000 a month. Add in the capital for improvements and operations, and the monthly carrying cost exceeds $20,000 before the doors open.

For that operator, leasing is not a failure of ambition. It is the correct financial decision given the capital structure.

Leasing isn’t inherently a bad choice. The problem is leasing without ever honestly running the comparison.

High Values and Rates Can Make Ownership Hard to Justify

Even motivated buyers hit walls, and the reasons are usually structural. Property values in Lake Havasu City have moved significantly, and current rates compress purchasing power in ways that were not a factor a decade ago. Some operators want to buy but cannot make the numbers work right now.

“They want to buy, but sometimes it just doesn’t make sense given where property values are and where interest rates sit. So the lease ends up being the right call, but it’s tough. You have to have the money down. And depending on what you’re doing, whether you’re improving the space or you need capital for the business, there’s a lot that goes into it.” Randy Shuffler, Founder and Principal Broker, Lake Havasu City Commercial at Realty ONE Group Mountain Desert

That complexity is exactly why the comparison deserves a real underwriting pass before you commit to either path. An SBA 504 loan can change the calculus, dropping the down payment to 10% for qualifying owner-occupants. Even that option needs honest modeling against the specific property and your capital position.

Three Numbers to Have Before You Decide on Commercial Space

Three figures are worth keeping in mind before you decide whether to buy or lease commercial space in Lake Havasu City. Each one tells you something the listing sheet will not.

1. Start with the true cost of your current lease projected five and ten years out. Commercial leases here escalate, and a dollar per square foot today is not a dollar per square foot in year seven. Model those increases before you assume leasing stays affordable over the long run. The Arizona Department of Real Estate publishes resources on lease disclosure requirements. The escalation math itself takes someone who knows how local renewal cycles actually behave.
2. You also need the all-in carrying cost of ownership at today’s prices and rates. That means purchase price, down payment, debt service, insurance, property taxes, and a realistic reserve for capital expenditures. Think roofs, HVAC units, and mechanical systems that wear out on schedule. Do not model ownership on the mortgage payment alone, because the full carrying cost is the honest comparison.
3. There’s also the opportunity cost of the down payment itself. Cash used as a down payment is cash not deployed in the business. For some operators, that capital earns a better return staying inside the operation. For others, the forced equity of a commercial mortgage beats anything the business would have done with the funds. Only your own numbers can settle that question.

Depreciation schedules are another piece of the math, and IRS Publication 946 lays them out. Cost segregation often surprises first-time commercial buyers once they see its effect on their tax position.

Inventory constraints also shape this conversation in a real way. Available options are not always easy to find, and land scarcity in Lake Havasu City is permanent enough to shape every ownership decision.

FAQs About the Buy-Versus-Lease Conversation

Is buying commercial space in Lake Havasu City always better than leasing?

No. Buying makes sense when the all-in carrying cost competes with realistic lease escalations over time. It also requires enough capital for a down payment without starving operations. Leasing is the correct call when capital is constrained, tenant improvement needs are high, or the business model requires flexibility. The decision requires a direct comparison of the two scenarios.

What does commercial rent escalation look like in Lake Havasu City?

Commercial leases here typically include annual escalation clauses, often 3% a year or tied to the Consumer Price Index. A lease starting at $1.00 per square foot can reach $1.75 or more over 15 years. Tenants who skip this math often find leasing costs far higher than they would be with ownership at signing. These increases are part of a broader shift, with Lake Havasu commercial lease terms flipping in landlords’ favor.

How much does a small business owner typically need for a commercial down payment in this market?

Most conventional commercial loans require 20% to 25% down at closing. On a $1 million property, that means $200,000 to $250,000 in cash before closing costs, reserves, and any tenant improvement budget. SBA 504 financing can drop that to 10% for qualifying owner-occupants, which changes the capital access math considerably.

What is a true-net ownership snapshot, and why does it matter for the buy-versus-lease decision?

A true-net snapshot calculates the real monthly carrying cost of a specific property. That includes debt service, property taxes, insurance, and a capital expenditure reserve. It gives you an apples-to-apples comparison against your current and projected lease cost. Without it, most operators underestimate what ownership costs and overestimate the gap between leasing and buying.

What should a business owner do if nothing suitable is available to buy in Lake Havasu City?

Inventory is tight here, especially for smaller owner-user buildings in the 2,000- to 6,000-square-foot range. Off-market conversations and pre-market relationships often surface options that never reach LoopNet or CoStar. A local broker with active relationships gives you a far better shot at finding something before it is gone.

Should a business owner consider building from scratch if no suitable commercial space is available to buy?

Ground-up construction is one option, but it usually carries longer timelines, entitlement risk, and higher per-square-foot costs. Some operators here are already exploring county land outside city limits to ease the inventory squeeze. Whether construction pencils depends on intended use, your time horizon, and access to construction financing. In many cases, redevelopment beats ground-up construction in Lake Havasu right now, and the tradeoffs are worth weighing.

What tax advantages come with owning commercial real estate as a small business owner?

Ownership opens depreciation deductions on the structure, and a cost segregation study can accelerate them. It does this by reclassifying components into shorter depreciation schedules. Property taxes and mortgage interest are also deductible business expenses. These do not show up in a simple rent-versus-mortgage comparison, but they can meaningfully change the after-tax cost of ownership. Consult a qualified tax professional for guidance specific to your situation.

Run the Numbers Early

Most business owners measure rent annually instead of across full ownership cycles. That short view hides how quickly lease costs compound over time in this market. Ownership comparisons only work when you run the full numbers before the next renewal.

Leasing might still be the right decision, but that depends on several factors. The key is to run the numbers before the next lease cycle so you can make an informed decision. Reach out to Shuffler Commercial Realty to model both paths before renewal pressure sets in.

Randy Shuffler is the founder and principal broker of Lake Havasu City Commercial at Realty ONE Group Mountain Desert. He holds the CCIM designation and a BS in Finance from San Diego State University. For more than two decades, he has advised commercial investors and business owners across Lake Havasu City, Kingman, and Mohave County.