Turning Points: Buying a Building – Part 2

This week, we’re continuing a discussion about the pros and cons of purchasing a building for your practice. Of course, there are many important factors to consider before deciding if it makes sense for you. Part 1 of this series outlined many of the positive attributes of building ownership. Now let’s consider the argument against purchasing rather than leasing your clinic space.

Regardless of the current favorable climate for the purchase of commercial real estate, upfront costs for such a purchase are often substantial and can negatively impact cash flow:

• Down payment
• Closing costs
• Cost of renovations to customize the space
• Additional insurance costs

In addition to upfront costs, maintenance and repair bills cost the building owner both time and money:

• Routine maintenance
• Troubleshooting problems with the building, grounds and parking areas and overseeing contractors necessary to solve problems.
• Periodic “refreshing” of the furnishings

There are also intangible factors that can negatively affect building owners such as rising interest rates or a decline in the relative attractiveness of the area in which the building is located. In the event of significant practice growth, the size of the building may become a limitation as well. Purchasing a building is certainly a long-term commitment with a higher level of risk than leasing.

Up next week: How to know if purchasing a building is right for you.