Choosing a space for your medical office involves consideration of many factors – from location to signage to infrastructure. But one of the most important questions you’ll find yourself facing is whether to lease or buy the space you’ve decided on. Making the right decision here is vital to your business’s financial stability and longevity. If you’re weighing whether to buy or lease, here’s what to consider.
When to Buy Your Medical Office Space
We all know that property ownership is a powerful path toward financial independence. Here’s when buying a medical office makes sense:
- You’re thinking long-term. Purchasing a medical space comes with a significant initial outlay that can take some time to recoup. If you plan on staying in a space for years, and your practice is stable and established, buying can be the right choice. This is especially true if you have expansion in your sights.
- You value control – and equity. Buying can remove risk factors like rent increases and help you build additional equity in your business. Buying is also a smart choice in areas that traditionally see real estate appreciation or that are in a growth corridor. It also gives you control over occupancy, renovations, and factors such as signage and repairs.
- You have the capital. If you have the capital – whether individually or as part of a larger group – having a medical practice asset on the books can be a great way to build your net worth. Talk to a CPA or lawyer about the potential tax advantages and legal protections involved in owning a building through your business or a separate entity.
- Succession is in your future. Lenders often see established physicians as a low-risk option, especially if a practice is well-established. Purchasing can be a good option if you want to consider leasing out your building upon retirement as an additional income stream. A sale-leaseback approach is another option if, in the future, you need to unlock equity in your property.
When to Lease Your Medical Office Space
In the shorter term, leasing is a lower-risk option that offers more flexibility – and lower up-front costs. Here’s when leasing is the right choice:
- You’re a young professional. If you’re early in your career, the future might bring extensive change. Leasing allows you to establish yourself in the short-term, while not tying you down to a building or area as your career (or family) aspirations grow. It’s also a lower-risk option financially if you’re hanging out your shingle for the first time.
- You value nimbleness. The world is quickly changing – and so is healthcare. Leasing allows you to pivot quickly should things change in your specialization or market. Signing a lease allows for faster ramping up than purchasing, and exiting a lease is also quicker than closing on a property. Additionally, if you need to make changes to your business, you may be able to renegotiate your lease.
- You’re mindful of capital. Purchasing medical real estate is a significant investment that can tie up capital you might have otherwise used for hiring staff, upgrading your technology, or investing in your own career. Additionally, the lower up-front costs of leasing mean that you can potentially open in a more financially viable area or in a high-demand space such as a medical park.
Looking to Buy or Lease a Medical Office? Talk to GZ.
Whether to buy or lease your medical office space can be a complex question. At Gittleson Zuppas Medical Realty, we can help you decide which is the right path for your healthcare business – and how to successfully walk it. From identifying a great space to helping you negotiate a lease, offer, or buyback, we’re here to set you up for success. For more information, contact our friendly team today!