If you’re opening your own private healthcare practice, finding the right property is likely at the top of your to-do list. Of course, buying medical office space can seem daunting, but there are many benefits that accompany owning commercial real estate. Here are some things to keep in mind as you search for a building that suits your new enterprise.
When looking for real estate, of course, you’ll be all-too-aware of the price tag. But there are some hidden costs you should keep an eye out for, such as:
- Due diligence costs
- Renovations and repairs
- Closing costs
- Property tax
- Moving costs
The good news is that many of these are one-time issues and can be easily managed if you budget correctly.
Purchasing can also be a great long-term financial decision. With a mortgage, you have a stable monthly payment for 15-20 years, without the uncertainty of rent hikes. Interest rates are also likely to be quite favorable, as lenders see medical practices as recession-resistant and therefore a good investment.
Owning your office space affords you certain tax shelter opportunities that can help you keep a larger chunk of your business income. For example, you can save on taxes with the ability to deduct operating expenses and depreciation.
Being the building owner means you may be able to take deductions for mortgage payments and management costs. This expense deduction also applies if you rent a portion of your space to another entity. A qualified accountant can help you lay out a plan to get the most out of your ownership.
Room for Expansion
Since you’ll be committing to a 15-year mortgage, you want to make sure you’re planning for the future. This includes options to expand, whether that means adding a new partner or a larger waiting room.
There are a few ways you may go about this. If you’re sure you’re going to need more space, you can purchase a larger building than you currently need and rent out the unused area. When your tenants’ lease is up, you can renovate or reconfigure your layout for expansion.
Another option, if you have the resources, is to purchase two properties: one that fits your current needs and one that will serve your practice once it grows. In this scenario, you occupy the smaller property while leasing out the other, then move into the larger building when necessary and lease the smaller.
Depending on the area you choose to invest in, your property can gain value over time. This is influenced by several factors, including the following:
- Population growth
- Supply and demand
- Changes in properties nearby
To ensure your potential real estate is likely to increase in value rather than decrease, you can enlist the help of a commercial real estate broker who will have the resources and knowledge to help you make an educated purchase.
Appreciating property can be a great investment, allowing you to sell or lease after you’ve stopped practicing. Some owners actually use this strategy to fund their retirement.
Advantages of Being a Landlord
The most obvious advantage, of course, is having an additional source of income separate from that of your practice. This can be especially helpful during office expansion or other time of uncertainty.
If you’re a business owner who prefers to be in charge, owning your office can be a boon. With no contracts or stipulations about how you manage the space, you get the last word on how things are run.
Leasing vs. Buying
If you don’t want the commitment of purchasing real estate, there’s always the option to lease. However, there are several elements you should consider to determine if leasing is actually the better choice.
Timeline of Active Practice
Leasing can be great if you’re only looking to stay in one area or continue practicing for a short amount of time. Rent may even be cheaper than a mortgage payment for the first three to five years. However, that expense tends to rise thereafter, making a mortgage more financially prudent if you plan to stay put long-term.
Risks of Owning
Purchasing real estate can be a risky business. If you buy a building, its value may change based on fluctuating factors such as the following:
- Downward market trends
- Hospitals changing location
- Change in neighborhood
If you lease, you don’t have to worry about eventually selling or renting.
In popular areas, leasing may be a matter of necessity. Finding a medical office space for lease tends to be easier than finding a building for sale in highly valuable areas, which means choosing to lease can keep you close to a prime location.
Assistance with Commercial Real Estate Purchasing
Royal Commercial Real Estate helps individuals and businesses find the perfect property to fit their needs. We’re proud to offer our specialized knowledge and personal focus to landlords, tenants, buyers, and sellers. Learn more by contacting us at 480-306-4399 or visit us online.