Turning Points: Purchasing a Building – Part 3

With the current COVID-induced downturn in commercial real estate in addition to low interest rates, it may be a great time to purchase a building to house your practice. Parts 1 and 2 of this series outlined some of the positive and negative attributes of building ownership in general. However the final analysis depends on many factors that are unique to each individual. Here are the top items you should consider to determine if building ownership makes sense for you:

• Cash flow – Available cash and/or lending terms should be such that buying the building will not leave cash below acceptable levels (2 months worth of expenses at the very least).
• Practice stage – Purchasing a building often makes the most sense for those who are neither new to practice or close to retirement.  
• Location – The building to be purchased should be as close as possible to the current practice location and convenient for the current patients. Also consider traffic, parking, ease of access to the building and neighborhood demographics.
• Size – Those who purchase a building are generally planning for future growth. The new location should have ample space to accommodate additional equipment and staff.   
•  Layout – Make sure the space available has the potential to be renovated in a way that will result in efficient patient flow. This is critical – simply bigger isn’t necessarily better.
• Logistics – Plan well in advance so practice interruption is kept to a minimum during the move from the leased space to the purchased building. Renovations in the purchased building should be complete before the current lease expires. 
• If excess space exists, consider leasing that space.

In addition, be sure to consult with your tax and legal advisors to make sure there are no hidden issues or unexpected disadvantages that could impact your decision.

Up next:  My experience – why purchasing a building was among my top business decisions.