No, there is not an allowable expense as you have described the situation.
Unfortunately, what you describe does not appear to have been recorded properly for income tax purposes. See INCORRECT LESSOR TAX RETURNS for an overview of the issue.
Property that you are leasing to another party does not have any cost of goods sold (COGS) component allowable as a current year expense for the cost of the property being leased. Rather, for an operating lease, the property cost is recorded as an asset and depreciation is claimed to recover the cost of the leased property instead of taking a COGS expense.
Buying a property with borrowed funds is not recorded differently for the asset and depreciation as buying the property with cash. The entire property cost is recorded as the value of the asset a depreciation expense is claimed annually to recover the cost of the leased property and an accumulated depreciation account for that asset is used to track the basis (cost - accumulated depreciation) of the asset.
The loan is recorded as a liability on your books. The interest paid during the tax year on a loan to obtain the asset would be a current year expense. The principal is recorded against the loan to reduce the liability amount of the loan on your books.
At this point, you need to review the expenses claimed to determine the correct amount that should have been deducted as depreciation and what might remain as a depreciable basis for a current year depreciation expense.
Whether you attempt to do this yourself or have an accountant or tax practitioner assist in determining the correct amounts is your choice.
I hope this clearly explains why you can not simply deduct the loan payments as COGS and the basics of what needs to be done for income tax purposes.
I see, not good for me then. What if in the future I sell a piece of hardware that the client pays for over a period of time..................say 24 months. Would the initial purchase of hardware be cogs in that case or still my assest that is depreciated?
Sale with installment payment would allow for claiming the cost and gain in the year sold. You would record the balance due in the future as an asset and reduce that receivable as payments are later received.
Sale and lease are not the same; since you do not continue to have rights of ownership after the sale.
I hope that helps to clarify for you.