Turning Points: Purchasing a Building – Part One
For most of us, there are at least a couple of major decisions which have a profound impact on our careers. Certainly, the choice to purchase versus lease our clinic space is one of them. With the current COVID-induced downturn in commercial real estate in addition to low interest rates, it may be the right time to purchase a building to house your practice. Of course, there are many important factors to consider before deciding if it makes sense for you. This week I’ll present the arguments in favor of owning rather than leasing.
One of the most important reasons to control your own destiny by owning your building is that patients are likely to seek healthcare near their homes. Therefore, a practice benefits from remaining in the same location for many years. When you own rather than lease, you avoid the threat of a move necessitated by lease issues (non-renewal, heavy cost increases, etc.). In addition to the possibility of losing patients, moving can be expensive and time-consuming, which affects profitability. Another major ownership benefit is that the building can serve as a second source of equity in addition to the practice. Here are some other reasons why you should consider owning the location in which you practice:
- Freedom to renovate the space as you desire
- Known cost of mortgage and taxes versus unknowns associated with periodic lease negotiations.
- Tax benefits – mortgage interest, improvements, property taxes, depreciation can all be used as deductions
- In the long-term, owning is usually less expensive than leasing
Up next week: The negative aspects of building ownership.