When opening or adding an additional location, it is important to consider the pros and cons of buying versus leasing office space. While both options have their advantages, owning real estate can offer significant benefits.
One of the primary advantages of owning real estate is the potential for equity growth. As property values increase, so does the value of your investment. This can provide financial security and stability for your practice, and can be especially valuable in the later years of your career. It should be noted that dermatologists can often access some of the lowest financing rates available for acquiring real estate. When you decide to retire or sell your practice, you have the option to retain the property, become a landlord and collect on-going cash flow from the real estate investment.
Another advantage of owning real estate is the potential for lower costs over time. While the upfront costs of purchasing a property may be higher than signing a lease, over the long run, owning can be more cost-effective. Assuming you finance the property purchase over a straight line amortization, the monthly cost of ownership will generally become level with a lease payment within seven or eight years. When you lease, you are subject to rent increases and may have limited control over maintenance and repairs. When you own your own property, you have more control over expenses and can budget for repairs and upgrades on your own timeline.
Depreciation is another benefit of owning real estate. As a high-income dermatologist, you can take depreciation deductions on your taxes, which can help to lower your overall tax burden. This can be a significant advantage, especially as you near retirement and may have fewer deductions available.
Finally, owning your own property can provide greater flexibility and control over your practice. When you lease space, you are limited by the terms of your lease and the availability of space in your building. When you own your own property, you have the ability to customize your space to meet the specific needs of your practice and can make changes and improvements as you see fit.
Of course, there are also potential downsides to owning real estate, including the upfront costs of purchasing a property and the potential for unexpected maintenance and repair costs. Additionally, owning real estate can tie up capital that could be used for other investments or expenses. For example, if your goal is to open multiple locations within a relatively short time-frame, you may want to lease space to preserve capital for expansion.
Ultimately, the decision to buy or lease office space is a personal one and will depend on a variety of factors, including your financial situation, long-term practice goals, and the current real estate market. As a dermatologist who is experienced in owning a practice, you should carefully evaluate your options and work with trusted advisors to make the best decision for your unique circumstances. By owning your own property, you can achieve financial stability, flexibility, and control over your practice, which can be valuable throughout your career.
If you would like to discuss the best option for your goals, please contact me at 214-232-0718.
