As the healthcare industry continues to grow and evolve, medical professionals are faced with the dilemma of whether to lease or own their office space. This decision can have a significant impact on their practice’s financial stability and long-term success.
At Daniels Greer Commercial Real Estate, we believe that leasing is often the best option for medical professionals looking for office space. In this blog, we will discuss the benefits of leasing over owning a medical office space.
Leasing a Medical Office Space
Leasing a medical office space involves renting the space from a landlord on a short-term basis, usually 3-5 years. Let’s take a look at some of the benefits and cons of this option.
Benefits:
Lower Initial Costs
One of the main benefits of leasing a medical office space is the lower initial costs. When you lease, you typically only have to pay a security deposit and the first month’s rent as opposed to a down payment when purchasing a property. This allows for more flexibility with your finances, especially for new practices or practitioners who may not have large sums of money readily available.
Flexibility and Affordability
One advantage of leasing a medical office space is the flexibility it provides. Leases typically last for a shorter period, such as 3 to 5 years, compared to owning, which can be a long-term commitment. This makes leasing an ideal option for healthcare professionals who are just starting their practice or those looking to relocate in the near future.
Moreover, leasing offers more affordable upfront costs compared to owning. When you lease a medical office space, you do not have to worry about making large down payments or taking out hefty loans. This means that you can use your capital for other aspects of your practice, such as purchasing equipment or hiring staff.
Less Responsibility
When you own a medical office space, you are responsible for all the maintenance and repairs of the property. This can be time-consuming and costly, especially if there are major repairs needed. On the other hand, when you lease a medical office space, the landlord is responsible for any necessary repairs and maintenance.
Additionally, leasing allows healthcare professionals to focus on their practice without having to worry about managing a property. This can be particularly beneficial for those who have a small practice or limited resources.
Prime Locations
Leasing also offers access to prime locations that may not be feasible for ownership. Medical office spaces in desirable areas often come with a high price tag, making it difficult for healthcare professionals to purchase them. By leasing, you can have the opportunity to establish your practice in a coveted location without the financial burden of owning.
Tax Deductions
Leasing also offers tax benefits, as you can deduct lease payments as business expenses on your taxes. This can help reduce your overall tax burden and increase your bottom line.
Cons:
Limited Control over Property Improvements
One of the main cons of leasing is that you have limited control over property improvements. Since the space is not owned by you, any renovations or changes to the office must be approved by the landlord. This can limit your ability to customize the space according to your specific needs and preferences.
Rent Increases
Leasing also comes with the risk of rent increases at each lease renewal. This can make financial planning more challenging as there is no guarantee that your lease will remain at a consistent cost.
No Equity
Another disadvantage of leasing is that you do not gain equity in the property. This means that all payments made towards rent are essentially gone once the lease term is up. On the other hand, when you own a medical office space, you have the potential to build equity and eventually sell for a profit.
Owning a Medical Office Space
Owning a medical office space involves purchasing the property with the intention of using it for your practice. Let’s take a look at some of the benefits and cons of this option.
Benefits:
Long-Term Investment
One of the biggest advantages of owning a medical office space is that it serves as a long-term investment for your practice. Instead of paying rent each month, you are building equity in an asset that can potentially appreciate in value over time.
Greater Control and Customization
Owning also gives you greater control over the property. You have the freedom to make any changes or improvements to the space without having to seek approval from a landlord. This allows for more customization and flexibility in designing your office to fit your specific needs.
Potential for Additional Income
If you own a larger medical office space, there may be opportunities to sublease unused space to other healthcare professionals, generating additional income for your practice.
Tax Benefits
Owning a medical office space also comes with tax benefits. Mortgage interest, property taxes, and depreciation are all tax-deductible expenses for commercial properties, which can result in significant savings for healthcare professionals.
Cons:
Higher Initial Costs
The most significant disadvantage of owning is the high initial costs. In addition to a down payment, there are also closing costs, property taxes, and potential renovation or improvement expenses. This can be a significant barrier for new practices or practitioners who may not have substantial funds available.
Maintenance and Repair Costs
As an owner, you are responsible for all maintenance and repair costs. This includes routine upkeep as well as unexpected repairs, which can add up quickly over time.
Less Flexibility in Location
Owning also limits your flexibility in terms of location as it is a more permanent commitment. If you need to relocate your practice, it can be challenging to sell the property quickly or find a suitable tenant for a sublease.
The decision between leasing and owning a medical office space ultimately depends on your individual needs and goals. Leasing offers flexibility and lower upfront costs, while owning provides equity building and customization options. At Daniels Greer Commercial Real Estate, we are committed to helping healthcare professionals find the perfect space for their practice. Contact us today to discuss all of your commercial real estate needs!