A synopsis of an article from Medical Economics, December 16, 2005.
At first glance owning your office looks pretty good appreciating value, stable mortgage, no rent increases. However experts disagree as to the viability of such a venture. Some key considerations include:
1. The length of time you plan to continue your practice.
2. The rental flexibility of changing location or adding space.
3. The financial tax breaks, asset value and independence of ownership.
4. The potential of buying more space than needed in order to lease the additional space for more revenue.
Among the many issues raised by experts, here are some more that seem to be critical to the decision-making process:
1. Is there a need or a value to being located amidst other medical offices? If so, will ownership allow the same proximity as rental?
2. On a productivity side, does your practice have unique space needs that are difficult to find in rentals?
3. Ownership provides location stability crucial to building a practice.
4. Could significant rent increases create a financial hardship for your practice?
5. Purchase of an office or building through a separate corporate structure enables you to separate rental revenue from your practice with potential tax savings. Plus, once a mortgage is paid, your practice can still pay rent to your rental company.
6. Medical offices and buildings may not be easy to sell at time of retirement, due to the specialized nature of the space.
7. Ownership within a practice "partnership" can cause additional frictions.
8. Ownership entails maintenance responsibility, which many doctors do not want to undertake.
9. Always consider the planned growth of your practice both in space and staff.
10. Accessibility issues for patients.
11. Will ownership restrict other investment opportunities?
Whatever your choice, explore the potential benefits and pitfalls unique to your own situation with your professionals advisors lawyer, accountant, insurance representative as well as your mentors, family and staff.
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