There are many myths and misconceptions surrounding medical real estate that can lead to costly decisions for healthcare providers. This guide aims to dispel these myths and provide clarity on crucial aspects of leasing and purchasing medical office space.
Myth 1: You Don’t Need a Real Estate Broker if You Have an Attorney
Healthcare providers often confuse the roles of real estate brokers and attorneys. While both are essential, their expertise does not overlap. Your real estate agent should not provide legal advice, and your attorney should not negotiate real estate terms. Lease and purchase contracts are legally binding and should be reviewed by an attorney. However, only a real estate agent can effectively find properties, negotiate terms, and secure the best deals.
A good real estate agent can save you time and money by avoiding costly pitfalls and ensuring you receive favorable terms. Healthcare-specific real estate agents can save you tens to hundreds of thousands of dollars over a ten-year period. Always hire the best agent you can and let your attorney focus on legal aspects.
Myth 2: Landlords Don’t Give Concessions on Renewals
A common statement from landlords is that they do not give lease renewal concessions. This is often a tactic to avoid negotiations. In reality, with proper representation and strategy, you should expect the same fair terms as a new tenant. National tenants, such as large retailers, do not accept inferior renewal deals, and neither should you.
Starting the renewal process at the appropriate time and hiring a qualified agent who understands your needs is crucial. Proper preparation can ensure you receive concessions and avoid penalties for starting too early or too late.
Myth 3: Owning Commercial Real Estate is Always Better Than Leasing
While owning property has benefits like building equity and receiving tax deductions, it is not always the best option. Factors such as the stage of your career, ideal practice location, and the quality of the building must be considered. Here are some questions to ask:
- Can I qualify for a loan to own or build my space?
- Is this the location I want for the next 15-20 years?
- Is it better to lease a smaller space now and purchase later?
- Is the increased payment and debt justified?
- What is my exit strategy in case of emergencies or retirement?
- Are there purchase opportunities in my desired area?
Leasing can provide flexibility and avoid the risks associated with ownership, such as outgrowing the space or needing more capital for expansion. Evaluate your long-term needs and consult with market experts to determine the best option.
Myth 4: My Lease is Keeping Me from Purchasing or Building New Construction
Many healthcare providers believe their current lease prevents them from expanding. However, breaking a lease and moving forward with new construction can sometimes be more cost-effective. Consider the following:
- Construction Costs: These increase annually, so delaying a project can lead to higher costs.
- Interest Rates: Rising interest rates can significantly impact loan costs.
- Lost Revenue: Staying in a smaller or outdated space can limit your practice’s growth and revenue potential.
- Prime Locations: Waiting too long can result in losing desirable locations to competitors.
Consult with an expert agent to analyze the costs and benefits of breaking your lease versus waiting. A detailed analysis can reveal potential savings and opportunities for growth.
Conclusion
Dispelling these myths and understanding the realities of medical real estate can lead to better decision-making and financial outcomes for your practice. Always seek professional representation and ensure you are fully informed about your options. By doing so, you can maximize the opportunities and benefits available in the medical real estate market.