Healthcare Real Estate Experts: Leasing vs Buying MOBs

Working at a hospital or any healthcare facility as a medical practitioner is generally considered a stable, high-income job. Because their skill and services are always in demand, maybe now more than ever, healthcare workers enjoy a decent, regular income.

The profession is definitely among the top paid in the U.S. and all over the world. Here in the U.S., it isn’t uncommon to see some health workers with annual earnings as high as $300,000! With figures like this and higher job security, it is no surprise to see that more and more people are eager to join this elite workforce. Click here to learn more about health workers’ earnings.

Despite all the perks that come with having a stable job at a hospital, pharmacy, or any healthcare facility for that matter, the number of medical practitioners that are starting their private practices is steadily rising.

There are several reasons health workers start their practice. A few of them include:

Healthcare Real Estate Experts: Leasing vs Buying MOBs

• Reputation:

Yes, influencers, footballers, TV stars, and so on are not the only ones that get popular and build a credible reputation; doctors do too. When a practitioner has built a solid reputation in the industry, starting a private practice becomes easier since you don’t have to worry about earning patient’s trust or even potential investors. 

Take Ben Carson for example, after the success of the Siamese twin's operation, his reputation both in the medical field and in all other fields skyrocketing. If he had decided to start his practice, would anyone have hesitated to be a part of it in one way or another? We can both agree that the answer is obvious. 

• Skill and Experience: 

Health workers who believe they have acquired the necessary experience and skill to run their hospitals tend to go ahead and do so. 

• Self-Challenge:

Believe it or not, some people challenge themselves to achieve what others say they can’t, and there have been such cases with medical practitioners that start their private practice.

Whatever be the reason that health workers decide to try out private practice, they all come to one important juncture early in their entrepreneurship journey-choosing between leasing or buying a medical office building or space. This decision is extremely critical and can determine the success of the venture.

Not surprisingly, these practitioners often do not know which option is best for them since they aren’t trained in that field, and that’s perfectly fine. If you’re in this boat, then today is your lucky day. In this article, we’ll look at the pros and cons of both options and from there, you should be able to make the right choice. Of course, there’s also the option of paying an in-person visit to healthcare real estate experts for more detailed consideration. 

Pros of Buying

• Rental Income:

This is one of the major advantages of buying over leasing as one could easily create a secondary income stream. If you’ll be taking out a loan to purchase the property, you stand a better chance of getting the loan once the lender confirms that your business would be occupying at most, 50% of the building. 

Reason being that they are confident that you’ll be able to service the loan once you rent or lease out the other parts of the property. For instance, if it’s a story building, you could use the top floor for your business and lease or rent out the ground floor to a restaurant or any other business of your choice. 

• Control:

Of course, when you buy a building, you have full control over it; you are free to do whatever you like with it and not have to answer to anyone. As a result, you can reconfigure it to fit the needs of your business at any time. 

• Asset Appreciation:

Generally, the value of real estate appreciates over time which means if you decide to sell in the future, chances are that you’ll make a lot more than what you paid initially to acquire the property.

• Tax Breaks:

While there are tax benefits to leasing as well, buying comes with additional tax breaks. Things like property tax, interest, mortgage, and a few others can be deducted. 

Cons of Buying

• Loss of Capital or Liquidity:

We cannot rule out the possibility of the property’s value declining in the future due to events like a recession. In such as case, if you’re forced to sell, you’ll likely suffer a loss in your capital. 

Also, when you purchase a building, you tie down a lot of money that could otherwise be used to help the business in many other ways if you signed a lease. 

• Upfront Cost:

The prices of many buildings are extremely expensive and it’s often still the case if you decide to pay in installment. For instance, if you decide to purchase a property for $1 million, expect to make a down payment anywhere from $100,000 to as much as $400,000. 

• Liabilities:

As a property owner, you’re responsible for everyone on the property. This means that if anyone gets hurt, you’re the one to deal with it, especially if you rented out parts. Additionally, there’s also the issue of you repaying the loan if you obtained the property with one. This is because many lenders require a personal guarantee before giving out their money. 

Visit https://affiliates.legalexaminer.com/legal-issues-and-property-owners-liability/ to learn more about property owner liability. 

Pros of Leasing

• Fixed Monthly Costs:

With leasing, tenants do not have to worry about unexpected, expensive repair costs since those weren’t included in the lease agreement. While it is common for tenants on a lease to pay for a few minor repairs once in a while, they generally know exactly how much they are to pay at the end of each month which is very convenient. 

• Flexibility:

There’s an incredible amount of flexibility that comes with leasing a property. For one, tenants may be able to afford to lease an expensive property situated in a strategic or prime location that they wouldn’t be able to buy. Bear in mind that location is extremely important for medical practitioners. 

There’s also the option of moving out at the end of your lease if you feel the property’s location isn’t good for business. 

• Liquidity:

Unlike buying that takes up a lot of your money, you save a lot when you lease. The extra cash can be used to fund other important aspects of the business. 

Cons of Leasing

• No Passive Income:

You cannot rent any part out to other people as a secondary income stream since the building isn’t yours. 

• Expensive Rent:

It’s quite common to see rents that cost more than monthly mortgage payments on similar properties. Because other expenses are added to the overall cost of the lease, tenants often pay more than they would if they took out a mortgage.

• No Control:

Since the property belongs to someone else, there are certain limits to what a tenant can do with space. Also, if the landlord decides to hike the price at the end of your lease, there’s simply nothing you can do about it. What’s worse is that you’ll still pay your rent even if you went out of business during the lease period to avoid getting into trouble with the law. 

Conclusion

Running a business is no easy task and the same goes for private clinics and hospitals. Nearly every decision you make will have an impact on the business one way or another. So, to get started on the right foot, you’d have to choose how best to acquire a space to begin your practice. Go through both options again and carefully examine them to see which you think will work best for you.