The difference depends on use, timing and capital recovery assumptions; a lower present cost does not certify a sound transaction.
Compare two present-value scenarios
Edit your assumptions. Results update immediately.
Unfinanced model before income tax with constant ownership costs. Enter your expected net resale proceeds; zero assumes no capital recovered at the end. A negative difference means buying has a lower present cost in this scenario. Saved data stays in this browser; this tool does not send it to the server.
Compare alternatives providing the same use
Begin with the need: access to a defined area for a particular activity over a stated period. Buying and leasing are directly comparable only when both can meet that need with similar access, services and conditions. An owned plot without a connection is not equivalent to a leased site ready to operate. Check the planning rules for the municipality and confirm the intended use before interpreting the financial difference. Medellín POT materials provide rules and mapping for that review when the property is inside the District. Outside the form, record conditions that could prevent either option: an incompatible use, unresolved access, an insufficient contract term or an undocumented ability to lease the property. This calculator compares land costs; it does not forecast business income or recommend an investment. If one option enables higher sales, expansion or fewer interruptions, an additional analysis must include those flows and their evidence. Do not attribute an advantage to lower cost when it actually depends on different project characteristics.
Document price, costs and resale separately
Enter the negotiated land amount as purchase price and confirmed additional outlays for the transaction as purchase costs. The tool does not assess notary charges, registration or taxes, or determine who pays them. Annual ownership costs combine recurring amounts you would bear as owner, such as maintenance, insurance and specified charges. Use the actual municipal property tax document, with its period identified, to prepare that allowance. The model repeats the same nominal annual ownership cost throughout the horizon and applies no automatic increase. Net resale proceeds at the end means the amount you assume would be recovered in the final year after selling costs, before income tax and without debt, because this comparison excludes financing. It is neither an appraisal nor a promise of a future buyer. Zero removes all capital recovery at the end of the scenario. If you expect to retain the land, you can explore a supported residual value, but explain that it is a valuation assumption rather than cash actually received.
Define rent, escalation and initial lease costs
Initial monthly rent is multiplied by twelve to form the first annual lease cost. The assumed annual increase compounds that amount from the second year onward. Use agreed terms or a labelled scenario assumption; the percentage in the form is not a statutory increase applicable to every land lease. Contract classification and terms need their own review. The Supreme Court provides commercial lease doctrine, but its conclusions should not be transferred to every agreement without considering context. Initial lease costs are paid at the start in this model and are not recovered. Distinguish a consumed improvement or fee from an actually refundable deposit: the form has no separate flow to return that deposit. If services, maintenance or tenant obligations differ from the purchase option, document how you treat them and consider a more detailed worksheet. Low rent can conceal works you must finance to use the land and cannot recover when the arrangement ends. Make these differences explicit before relying on a comparison of the displayed totals.
Keep the horizon and discount rate consistent
The horizon accepts whole years from one to fifty. The calculation groups each year of rent and ownership costs as a payment at the end of that year; it does not discount each monthly instalment separately. The annual discount rate expresses the weight you give today to future nominal cash flows. It is not a borrowing rate, guaranteed return or recommendation from the site. Banco de la República explains the distinction between nominal and real rates; use that distinction to avoid mixing future money amounts with present purchasing power without a consistent policy. Here rent grows by your chosen percentage, ownership costs remain constant and resale is the nominal amount you enter for the final year. The tool neither applies general inflation nor converts a real rate into a nominal rate. A zero discount rate adds amounts without reducing them for time. Do not also add assumed foregone interest to ownership costs if your discount rate already represents that opportunity cost, as that would duplicate the same economic idea.
Read present value and the sign of the difference
The present cost of buying adds price and initial purchase costs, includes each annual ownership cost divided by one plus the discount rate raised to the corresponding year, and subtracts net resale discounted back to today. The present cost of leasing adds initial lease costs and the growing annual rents discounted in the same way. The displayed difference is buying minus leasing. A negative value means buying has a lower present cost under these inputs; a positive value means leasing has a lower cost. The sign measures neither yield, taxable profit, business benefit nor access to financing. Buying can even produce a negative cost if the assumed resale has a present value exceeding the outlays; that is a reason to examine the assumption rather than celebrate a guaranteed profit. Both scenarios exclude credit and are before income tax. Identifying the property and reviewing the register remain separate tasks: a favourable financial result does not establish that you can acquire or transfer the right you expect.
Work through a hypothetical three-year example
Assume a purchase price of COP 180,000,000, initial purchase costs of COP 10,000,000, annual ownership costs of COP 3,000,000 and final net resale of COP 180,000,000. For leasing, use initial monthly rent of COP 2,000,000, an assumed 5% annual increase and initial costs of COP 4,000,000. The horizon is three years and the chosen annual discount rate is 10%. These are invented example inputs, not prices, tariffs or recommended rates. Annual rents would be COP 24,000,000, COP 25,200,000 and COP 26,460,000. After discounting, buying costs approximately COP 62,223,892 in present value and leasing COP 66,524,418. The difference is approximately negative COP 4,300,526. Buying appears cheaper within this scenario, but that conclusion depends heavily on recovering COP 180,000,000 at the end. Document and stress-test that assumption. Neither a current property tax document nor present registration guarantees the price or liquidity of a sale three years from now. A precise output remains conditional on an uncertain future transaction.
Find which assumption changes the preferred option
Keep the example and reduce only final net resale to COP 120,000,000. The present cost of buying rises by approximately COP 45,078,888 to COP 107,302,780, while the lease cost stays unchanged. That single change reverses the financial reading. Also test a shorter horizon, a different rent and another discount rate, explaining why each change might occur. At zero discount in the original example, buying totals COP 19,000,000 after resale and leasing COP 79,660,000; the large difference illustrates timing effects and does not establish that zero is the appropriate rate. If you must sell to recover capital but the sale is delayed, this form does not extend the horizon automatically or add maintenance months. If the lease does not secure use for the whole period, renewal is not assumed either. Model those contingencies separately and have the legal conditions reviewed. A robust option continues to make sense under documented plausible changes, instead of winning because one convenient assumption was chosen for it.
Bring cash, rights and flexibility into the decision
Save or download the scenario with an assumptions note: comparison date, property documents, cost basis, escalation, discount rate and explanation of resale. Saving works in this browser; sharing the file requires your action and does not request offers or procedures. Add a cash availability timetable, because buying needs initial resources that present value itself does not finance. Then examine continuity, ability to adapt the site, end-of-term obligations, improvements and early exit with advice on the actual agreement. Review access, services and planning compatibility for both options as well. The POT organises planning information and the register publishes legal history; neither determines your financial preference. Finish with a verifiable action: request a revised draft, confirm a cost item, commission title review or reject an option that cannot serve the project. The comparison helps organise questions and negotiate evidenced conditions. It does not replace documentation of rights or analysis of the business that would occupy the land.
Buy-versus-lease sensitivity worksheet
Complete scenarios in a copy and rerun the calculator changing one assumption at a time. The model compares present costs without credit; this sheet does not add an automatic chart or make future resale proceeds certain.
| Item or decision | Information and evidence for your copy | Next check |
|---|---|---|
| Comparable base scenario | Same use and horizon; documented price, purchase costs, rent, entry costs and recurring expenses. | Clarify scope and rights differences before interpreting which alternative has a lower present cost. |
| Net resale proceeds at the end | Assumed amount, end date, exit expenses deducted from price and reason for the chosen assumption. | Test a lower resale amount and one without growth; record the change without calling it a forecast. |
| Selected discount rate | Entered annual rate, reason for selection and consistent treatment of inflation and cash-flow growth. | Repeat with a justified alternative rate; do not automatically equate this assumption with loan interest. |
| Rent growth and annual expenses | Assumed growth, maintenance, taxes and each alternative’s obligations, with source or uncertainty. | Review omitted expenses and test different growth; total cost depends on the retained assumptions. |
| Liquidity and conditions outside the result | Initial payments, ability to remain, financing not yet modelled, improvements and exit conditions. | Check cash and restrictions separately; a lower present cost does not establish payment capacity or feasibility. |
Sources & bibliography
Read the full document, its date, amendments and scope. The editorial review date describes this page; it does not establish an authorisation or a specific answer about your plot or financing.
- 01Alcaldía de Medellín · Plan de Ordenamiento Territorial y cartografíawww.medellin.gov.co · Medellín
- 02Alcaldía de Medellín · Portal Tributario de la Secretaría de Haciendawww.medellin.gov.co · Medellín
- 03Función Pública · Ley 1579 de 2012, Estatuto de Registrowww1.funcionpublica.gov.co · Colombia
- 04Corte Suprema de Justicia · Doctrina probable en materia comercialcortesuprema.gov.co · Colombia; commercial lease context
- 05Banco de la República · Qué es la tasa de interés realwww.banrep.gov.co · Financial education; no discount rate is recommended