By Laurie L. Sorrenson, OD, FAAO
Investing in real estate is always a nerve-wracking decision, whether in your personal life or professionally. Like a house you are thinking about buying, you wonder if the house’s value will increase, and whether you will be happy there. When making the decision to purchase a building for your practice, the same concerns come into play, along with others.
For instance, you wonder not just whether you will be happy and comfortable, but how the new space and location will suit your patients and whether the investment is a smart choice given where you are in your career. If you are nearing the end of your career you wonder whether you will have time to reap the benefits of the investment and pay off any related debt, and if you are just starting your career, you wonder how long the new space will be right for you given your planned growth.
For more than 10 years I have been trying to decide whether to buy land and a building, or to purchase a building and renovate. Every time I got close to doing it, I would evaluate the numbers and decide it did not make sense for me at the time. After all, at this stage in my life–52-years-old–it seems like a huge debt to take on.
But despite these misgivings, I recently decided to do it. What I eventually ended up doing was a joint venture project with a builder. The builder and I will each own half the building, but I will lease about 70 percent from the company that the builder and I formed. This took some of the risk out and reduced the personal debt by half.
Key advantages: a larger building that I design from scratch to create better patient flow and customer service.
Purchasing real estate is a decision to make after careful consideration and financial analysis, but it is not a decision to think of with fear. There are purchase arrangements, like the one I made, that reduce risk and offer substantial benefits to the practice and your patients. Don’t let anxiety about making a purchase reflexively shut this option out of your mind. Run the numbers and think about if it is right for you.
I am satisfied with my decision and look forward to the practice enhancements this move will enable. Of course, as with all practice investments, only time will tell if I’m right–ask me again in a year and see what I think about it then!
Are you considering purchasing practice real estate? What are your top concerns and what are the greatest reasons for making the investment?