Advantages of Purchasing Real Estate

In today's market, there are many advantages to investing in office space for your practice. The timing of historically low interest rates combined with the current office market cycle has created unprecedented investment opportunities for physicians.

Two typical negative factors of investing in commercial real estate are the large cash outlay and potential vacancy. However, when you are purchasing for your practice, these two factors are virtually eliminated.

When buying for your own use, initial down payments can be as low as ten to fifteen percent of the purchase price. The most favored loan for commercial lenders is "office users buying for their business" or "owner-occupied loans." Because residential lenders offer the best rates and lowest down payments to owner-occupants for their primary residence, commercial lenders favor user loans over non-user or investment loans.

As far as potential vacancies, your practice might be the only tenant or a major tenant. Even if your practice is not ready to move or expand, medical office space has historically had the highest occupancy rates in the entire real estate market.

One advantage to physicians purchasing office space is principal reduction. When you own your own space, each month, part of your regular occupancy cost to operate your practice is reducing the principal balance of your mortgage. This can be significant. Many doctors are paying off their office mortgages in only ten to fifteen years! When they retire, the building provides a large sum of cash at the sale or provides cash flow if leased.

Inflation can work for or against you. Purchasing office space makes it work for you. Rent traditionally tends to increase over time. If you purchase, your landlord can't raise your rent each year. The cost to build or buy real estate also increases over time. So if you purchase, your building value should increase every year.

There are also multiple tax advantages that your accountant can confirm when you purchase office space. You can purchase the property as a personal asset and lease the office to your practice. The practice writes off the lease, and you can shelter some income through depreciation of a non-passive, personally owned and managed property.

Contact HRES at 248-514-9197 or submit the form below to request a consultation.