Here is what you need to know about making this key decision whether you are just starting your medical practice or ready to expand.
One of the most important factors to consider when looking to start your medical practice or expand your existing one is location. The right location can increase visibility, attract new patients and make it easy for your existing patients to reach you by public transit.
Whether you are starting a new practice or have outgrown your current practice's location, there can be benefits to both leasing and buying real estate. Consider what your long-term business goals are and how much space you need. Here are some other factors to keep in mind.
Pros of leasing
Leasing gives flexibility: Leasing allows you the flexibility to relocate to a new area or expand your growing business.
Leasing frees up your working capital: If you lease a building or space that is already equipped with other physicians and set up for a medical practice, you can get started right away with minimal start-up costs.
Leasing reduces the hassle of maintenance: Your landlord will handle all repairs and maintenance, allowing you to focus on what you do best — caring for patients.
Cons of leasing
Leasing can put rules on building use: Some leases don't allow the tenant to make physical changes to the inside or outside of the building. If the office and clinic space practice is worn down or the exterior is in need of paint and repairs, you'll have to count on the landlord for improvements.
Leasing costs can vary: Your monthly rent could go up each year, or the landlord could refuse to renew your lease if your agreement expires without a renewal option. Your landlord could also sell the building, forcing you to move. These are things you have little control over. Be sure you've reviewed your lease agreement carefully.
Leasing can affect your patient base: . If your landlord does not renew your lease, you will be forced to relocate, which may lead to potential loss of existing patients unwilling to follow you to your new location.
Pros of buying
Buying allows you more revenue streams: If you buy a large space you can rent out parts of it to other healthcare providers or pharmacists, thus creating a revenue stream.
Buying secures your location for the future: Grow your patient base for the long-term without worrying about switching neighbourhoods due to a leasing issue.
Buying is an investment: Buy a building and it can turn into a valuable investment by the time you retire. There is a possibility that you can sell your building for profit, or you can lease your building out for residual income into retirement.
Buying gives you tax deductions: When you own the property, you can claim various tax deductions associated with the cost of running your medical practice. These include mortgage interest, property tax, and other items. You can also claim building depreciation.
Buying gives you remodelling freedom: Need to update your building or change the interior layout to fit your practice's needs? Remodeling costs can be 100% financed as well through the Scotiabank Healthcare+ Physician Banking Program, so you can equip your practice with everything you need.
Cons of buying
Buying can stall your growth efforts: If you need to relocate your practice because you have outgrown your space, you can incur a lot of relocating costs or find yourself with a medical building that may take a long time to sell or lease. If you need to sell quickly, you might have to take a loss if the market is not thriving.
Buying requires more due diligence: In some cases, buying a medical building will require thorough condition inspections and environmental assessment. This can be done through an environmental inspection company and lawyer to ensure you have done your due diligence for patient safety before purchasing. These can add some additional costs and expenses.
Even if you make up your mind to buy, you may find yourself limited to the current real estate marketplace and location preferences for where you want to (to practice or) open, expand or grow your practice. If there are few medical buildings for sale in your desired area of business, you might have to choose to lease for a few years and consider buying later. Waiting to buy can potentially cost you more down the road if property values continue to rise. Each situation and practice is unique so it is important that your arrive at a decision that is right for you at each point of your medical career.
Scotiabank and MD Financial Management understand that as a physician, you have unique financial needs when starting, growing or managing your medical practice. Scotiabank Healthcare Specialists have decades of experience in practice financing and helping healthcare professionals like you thrive. An Advisor* can help you determine how your decision fits into your financial plan.
As your medical practice grows, your personal and professional financial needs will evolve too. Our tailored advice and solutions are customized uniquely for physicians at any stage in their career.
To learn more about the Scotiabank Healthcare+ Physician Banking Program and discuss your business banking needs contact a Scotiabank Healthcare Specialist.