These are life changing times we all live in these days…

 

The worst recession since the Great Depression, new healthcare reform, changes in referral patterns and demographic changes are causing major concerns throughout the medical community.

 

Many professionals realize and understand the need for some kind of a change, increase efficiency, finding ways to reduce operating expenses or looking for new or additional satellite offices in locations that are closer to their client base, etc.

 

Either way you look at it, there is no doubt that in upcoming years the success of your business will be tremendously affected by your choice of real estate location.

 

In today's real estate environment, many medical professionals are evaluating whether it would be beneficial for them to purchase office space rather than continue to lease office space.

 

There are plenty of common factors one must consider before making this decision.

 

• Cash Outlay – Typical purchase of an owner occupied office requires an average of 25 percent down payment. Leasing requires similar budget between the first and last month's rent, security deposits, tenant improvements when necessary and more.

 

• Opportunity Cost - What return would you expect to receive on that money compared to the return you would expect to receive if you invested the money back into your business or into other investments?

 

• Cash Flow Analysis –compare the net present value cash flow of both options to understand the real cost of each one for the next 10 years.

 

• Economic environment – the current commercial real estate market is somewhat depressed but offers numerous opportunities to choose from.

 

• The Local Market - Except from built to suit office buildings, new construction activity is almost non-existing and therefore, supply is expected to decrease dramatically in the near future.

 

• Overall, values have declined dramatically in the past 12 months.

 

• Interest rates are at historically low levels.

 

• In my opinion and the opinion of many experts, 10 year Treasury rates are expected to increase and we should all expect hyper-inflation in upcoming years which will cause the cost of construction to increase as well.

 

• When you own you have the ability to sell and lease back in the future to free up the capital again.

 

• Retirement - Owning your office creates equity when you own it free and clear at the end of the mortgage amortization period and allows you to either sell or lease for a steady monthly income.

 

• Financing – Government supported financing options are available today for owner occupied real estate by small businesses, and government grants are available based on employee hiring etc.

 

• Some developers offer owner financing to help the buyer with the down payment.

 

• A professional Lease v Own analysis may reveal major financial benefits.