When you are looking for a new space to practice your trade, there’s so much that can go into it. You need the right location and deals on rent or purchase – but what about other considerations? In this blog post we’ll explore some of the most important determinants of buying or leasing medical office space.
Determining Factors
The answer to the question whether you should lease or buy medical office space depends on numerous factors, and all of them include your business plans, long-term goals and of course budget. Here are some determining factors to help you make the right final decision.
#1 Taxes
When buying or leasing medical space you have to consider the taxes. Consult with your CPA about what can and cannot be deducted from federal income tax returns. This depends on whether the property will primarily serve one customer (such as an individual’s residence) versus multiple customers who share some common need such as healthcare providers in general communities around them that may require more than just basic office services. This would then allow for longer deductions based on 39 years worth of depreciation instead.
#2 Cost and Expenses
Numbers don’t lie. If you’re thinking about opening your own practice, one of the first things that comes into play is how much money do you want to spend on your credit card or bank loan payments each month? That decision will have an impact not just now but also down the line because as doctors know well enough – our overhead costs can quickly add up.
Purchasing a practice upfront is more expensive. You’ll have to pay for loan fees, inspections and appraisals all at once which can add up fast if you’re not careful with your budgeting. Plus there are no soft costs involved, so this will leave an impression on what kind of monthly payment we should expect from year to year.
#3 Location and Expansion
We know that every physician wants to have a successful private practice. But what happens if your business is doing so well it needs expansion? Well, if you own the medical office you have the advantage of expanding your current space to meet the new needs. If you’re leasing on the other hand, you will need to get various permissions for any substantial changes to be made, if changes are allowed at all.
But this is only one scenario and before you decide whether to lease or buy a medical practice, you should keep your long term plans in mind. If you are opening a practice in an area you don’t want to be in for the foreseeable future, leasing a medical office is definitely a better idea.
Pros of Buying Medical Office Space
The most obvious advantage is that you will be the property owner and have full control over it. Ownership also comes with certain tax breaks, plus you can customize the property to any particular need you might have.
You should also keep in mind that the location of your business can make or break it. If you’re lucky enough to find a medical office space that’s great for both growing the patient base and having an accessible transit stop, then by all means purchase the space as soon as possible.
Pros of Leasing Medical Office Space
As we mentioned, leasing comes with this amazing possibility to relocate your medical practice when needed. So if you find yourself in the position where you need a bigger space, you can just look for another.
Leasing is also less complicated in terms of paperwork and is oftentimes much easier to set up. It can also be a great option for people who want to focus on their practice without having the added responsibility of owning property. The landlord takes care of all repairs and maintenance, so you don’t need to worry about that aspect.
Here are some additional financial benefits to renting over buying:
- The initial cost of the property is much lower, and you can deduct any lease payments from your taxes if they meet certain criteria.
- You will have a higher cash flow which helps with credit ratings because it shows responsibility for making sure all bills get paid on time every month even when things don’t go according to plan.
- There may be some utilities included in rent like water or cleaning supplies – but this will depend entirely upon what’s written into each contract between tenant/landlord so make sure before signing up.
We’re Here To Set You On The Right Path
IPG advisors are here to help you invest in commercial real estate. Our team has years of experience and is ready to answer any questions about buying, selling or leasing medical properties.
We guide our clients through every step of their healthcare investment so they can feel confident about what happens next, without any surprises along the way.
