Owning vs. Leasing Property for Your Healthcare Practice
Should your healthcare practice buy or lease its property? We discuss the pros and cons of owning your office space and highlight the crucial factors to consider when making this decision.
With the increasing popularity of remote work and online shopping, there might be some available office spaces in great locations that you could buy for your healthcare practice. While there aren’t clear advantages or disadvantages to buying or leasing office space, there are several important factors to weigh. As you read through these considerations, think about what is best for your practice.
Commercial Lease Payments vs. Down Payment
First and foremost, owning your property means you don’t have to pay rent every month. The place is yours! You also don’t have to worry about rent increases. If you want to stay in that location for a long time, buying your property may cost less than paying monthly rent for that duration. In addition, you won’t be responsible for some of the common area maintenance expenses you’ll often find in commercial leasing agreements, such as landscaping or building security.
However, purchasing a commercial property requires a large down payment. That’s money you could use to hire employees or buy equipment. The purchase can tie up a significant chunk of your capital even before you begin building out the space for your practice’s needs. Consider whether the benefits outweigh the costs.
Maintenance and Renovations
As technology and the market change, you might want to adjust your healthcare practice to serve your clients more effectively or create the atmosphere you imagined for your business. Leased spaces often limit the type and extent of renovations you can make. In contrast, owning your office space gives you more freedom to make extensive changes to fit your needs.
However, when you own the property, you are responsible for paying for these costs, unlike when you lease a property and the landlord takes care of major maintenance expenses. Think about whether having control over the changes to your property is worth the financial burden that comes with it.
You might be planning to sell your business when you retire. Owning your office space allows you to sell the property or lease it and earn rental income. Thus, property ownership can help you maintain financial stability after you’ve moved on from your practice.
However, the success of this plan primarily depends on the property’s location. If your practice is in an area where running a business is challenging, you might struggle to find buyers or people interested in leasing. And what if your property hasn’t been well-maintained? In that case, potential buyers may decide that renovations would be too expensive. Potential lessees may decide that their business would require more modifications than renting allows. Consider whether the location is profitable in the long run and whether you are willing and able to keep the property in good condition so it remains attractive for many years to come.
Consider Your Money, Time, and Energy
When you own your property, it means you’re making a big commitment to that location. It requires a significant investment — not only financially but also in time and energy — to find a suitable space that can adapt to changes in the market. These costs can be challenging for a healthcare practice that is just starting. Consider whether the future of your business in that location can make up for the expenses involved.
Are you based in any of the states where Jackson LLP Healthcare Lawyers operates? Take the first step towards a successful healthcare real estate transaction by booking a consultation with our experienced attorneys. We make it a priority to understand your unique goals and objectives before diving into the process. Contact us today to schedule your consultation and set your healthcare practice on the path to success.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.