When Does Leasing Make More Sense Than Buying

If you are a healthcare professional weighing your options for acquiring new facilities, you are facing a big decision. To buy or to lease? At face value, it may seem like buying is always the best option. After all, owning your property can be a significant source of equity. But in reality, healthcare providers must consider many factors before deciding whether ownership is the best route for them. Let’s discuss.

Focus On Your Primary Business Goals

No matter what type of medicine you practice, your priority will always be providing the best quality care to your patients. With that in mind, your decision should have a basis on what will help you best achieve your primary business goals. For example, leasing may be the best option for healthcare professionals looking to expand their services quickly

Typically, lease terms are much shorter than a mortgage, so you will have the flexibility to transition to a new facility or open multiple locations as you grow your business.

Additionally, leasing often requires less up-front capital, which can be helpful if you are trying to conserve cash to invest in and grow your business.

Control Over Upgrades And Maintenance

Another significant factor is who will be responsible for facility upgrades and maintenance. When you own your property, you are responsible for all repairs, no matter how big or small. For example, if your HVAC system breaks down, that’s on you to fix. This will take up your capital and the time you could spend growing your practice.

Leasing allows you to pass those costs and hassles on to your landlord. Of course, you will still be responsible for the day-to-day upkeep of your office space, but any significant repairs to the building will likely fall on the shoulders of the owner

Capital Conservation

If you are looking to grow your practice quickly, you may want to consider leasing to conserve capital. While there are initial expenses such as security deposits, first and last month’s rent, and build-out costs associated with leasing, they are typically lower than the cost required to purchase a property, and you can finance them just the same.

Additionally, when you own a property, you are responsible for all the maintenance, which can be expensive. When you lease, your landlord is generally responsible for major building repairs, upgrades, and maintenance, freeing up resources to reinvest in your business.

Maximize Your Return On Investment

Investing in a healthcare facility is a big decision with long-lasting benefits and implications. Be sure to consider all your options and consult a healthcare real estate expert with questions.

While leasing may not be the right solution for everyone, in many cases, it can help healthcare providers expand their services quickly, serve new demographics, and conserve capital. A young and growing practice will generate a much higher ROI by expanding their business first and investing in real estate later.

Your Market

Your market will play a significant role in whether or not it makes sense to lease or purchase. For healthcare practices in rural areas where there are not a lot of professional landlords or institutional investors, it can make a lot of sense to purchase because there’s more inventory and less competition.

The closer you get to a major metropolitan area, the harder it typically is to buy. Prices are higher, due diligence periods are shorter, and there’s less inventory. Prime real estate typically gets bought up quickly, leaving only class C and below opportunities.

The question then becomes, “Am I better off buying a class C building in a less desirable location or renting a class A building in a prime location?” The answer to this question will differ from one practice owner to the next, so hire a real estate agent and vet all your options thoroughly

Which Is Right For You?

Whether to lease or buy will come down to several factors, including the long-term goals for your business, budget, needs, and the market conditions in your area.

At FOCUS Healthcare Realty, we work with healthcare professionals across the country looking to lease or purchase property for their healthcare practice. Our experienced healthcare real estate professionals can help you navigate the process from start to finish.

If you’re considering leasing or purchasing a healthcare facility, we encourage you to contact us today to discover how we can help you achieve your goals.

Stefan Zelich, President/Founder
FOCUS Healthcare Realty