Owning vs. Leasing Real Estate

The decision to own or lease real estate holds significant implications for individuals and businesses alike. While owning a property is often considered a safe investment opportunity with the potential for equity building and tax deductions, leasing offers its own set of advantages. There are key factors to consider when deciding between owning and leasing real estate, especially in the context of commercial or medical spaces.

Leasing Benefits for New Businesses

The majority of businesses opt to lease property, especially those in their early stages. Leasing offers several advantages for new businesses, as they are more prone to sudden growth and need to reinvest capital into their operations. Leasing expedites the process of finding and moving into a new space, mitigating risks based on lease terms. Additionally, having a landlord can prove invaluable for new businesses, as they can rely on them for repairs and maintenance. However, the downside of leasing is the potential lack of lease renewal if a landlord has alternative tenants lined up, along with the need to anticipate rent increases. These concerns can be addressed by carefully reviewing and agreeing to lease terms that align with your requirements before signing the lease agreement.

Pros and Cons of Buying Property

Buying commercial space can be an attractive choice for financially stable businesses seeking to invest capital. Real estate is a valuable asset that typically appreciates over time, providing potential long-term financial gains and tax benefits. Owning a commercial space eliminates concerns about rent increases, lease terminations, and landlord interactions. However, it’s essential to weigh the advantages against the limitations of buying commercial real estate, such as potential growth limitations and increased responsibilities for property maintenance and associated expenses.

Factors to Consider:

• Ability to qualify for a loan
• Is this the desired long-term location?
• The option of leasing a smaller space before purchasing or developing an ideal building
• Financial implications of owning versus leasing
• Potential profitability of leasing with tenant improvement allowances
• The consideration of an exit strategy in emergency situations or retirement
• Analyzing future space needs

Expert Guidance in Real Estate Decisions

There is no one-size-fits-all approach to owning vs. leasing. Determining your medical strategy is essential. Many healthcare practices aim for growth and must determine the appropriate amount of space required over the coming years. Striking the right balance is crucial, as being too conservative can hinder profitability due to reduced patient volume, while going too big can result in paying for underutilized space. What is right for one practice may not be right for another practice. Hiring an expert can help you fully evaluate all of your options and make an informed decision. At RMI Healthcare Real Estate Advisors, we only represent healthcare tenants and buyers, so you can be sure we have your best interest in mind.