When choosing how to use medical office space, medical practitioners often have three options to consider, each of which has benefits and drawbacks.
1. Buying Health Care Owning Real Estate Individually
The profits of commercial real estate can be suitable investments that match the risk. According to past experience, investing in real estate can be a helpful way to guard against inflation, and banks frequently provide excellent financing options.
There is also a lot of risk present at the same time. It needs to be noted that one should carefully consider their real estate acquisition decisions and never buy something only to avoid leasing (there is no such thing as truly free rent). Location is also another important factor. In the real estate industry, there is an old proverb that states: location, location, location! When considering investment options as well as when making plans for the development of your company, you should keep in mind this general principle.
The Benefits of Individual Medical Real Estate Buying
Fixed Cost: You can more accurately forecast the rent your practice will pay when you own the premises.
Smart Business: Owning normally makes more sense, even though it may initially cost a little more. You should take it into consideration if your practice can sustain it (the justification of “why pay rent to someone else when I might be paying to own it?” does hold water).
Real estate can be used as part of your recruiting package and provide liquidity events for retiring physicians if it is organised properly.
Potential Financial Gain: There is always a risk that the value of your property will increase. But keep reading.
The Drawbacks of Buying Medical Real Estate as an Individual
Location includes the possibility of having to give up location power and visibility because the ideal site might or might not be up for sale when you are ready to move or are in need of doing so. In most cases, a single practise cannot afford prime real estate.
Commitment: Once you purchase, moving is frequently more expensive when you own, and the money you have set aside for real estate is generally illiquid.
Capital-Intensive: Generally speaking, it will cost you a lot more money than leasing and you won’t have access to that capital.
Attention-Desirable: You might need to engage a property manager if you are the owner. You are responsible for making any necessary repairs and solving all issues.
2. Renting Medical Property
You enter into a lease agreement, which has many of the same terms as a loan, to agree to pay rent. A personal guarantee is frequently required under leases; if not, your practise will ensure payment. Typically, you are responsible for covering any finishing costs over and above the landlord’s tenant improvement payment. You will be able to walk away from the money you invested in the space at the end of the lease. When you rent, you contribute considerably or in part to paying someone else’s mortgage; they bear the risk, while you receive the reward.
The Benefits of Medical Leasing Real Estate
Lower Initial Capital Outlay: You can use the money you save to buy equipment, hire more staff, or spend on marketing to expand your firm. Your operational firm should generate greater returns on investment than your real estate holdings.
Flexibility: Once the lease’s term is up, you can leave without finding someone to take your place.
Less Risk: For the life of your lease, real estate market fluctuations won’t affect your real estate costs; the rent you agree to is what you get.
The Cons of Leasing Medical Real Estate
Limited Control: You will probably negotiate 50 to 70 clauses in a lease deal, and it’s likely that some of them won’t be to your benefit. Even if you have the nicest lease in the world, there may come a time throughout the course of your lease when you feel you are being treated unfairly and you have few options.
Investment Loss: At the end of the lease, fixtures and build-outs belong to the landlord.
No Investment Worth: The rent you pay has no long-term value. You are merely covering another person’s mortgage.