Category Archives: Lease vs. Buy office space

6 Reasons Renting Medical Office Space May be Better Than Buying

Medical office spaceFor many reasons, renting medical office space for your practice may be more practical and profitable than purchasing a building to house your practice. Both processes can be time-consuming and stressful, here are 6 reasons you may want to rent vs. buy medical office space for your practice.

  1. Lower Costs – If you can find an existing space with the layout you need for a medical practice, then less capital will be needed to convert the space to fit your needs.
  2. Landlord support – Renting medical office space often means that the landlord will provide some financial support to convert the property, particularly if your lease is long-term and they know that income will be generated for years to come. Maintenance and repairs are often negotiable as well.
  3. Speed-to-market – Renting vs. buying means that you will save time along with money because there will most likely be shorter construction times for upgrades than a full remodel.
  4. Cash flow – Renting eliminates the large cash expenditure required to purchase a building and frees capital to be used in other areas of your practice.You may be able to generate more income from your practice by investing the down payment you would have had to pay. Depending on your practice and the opportunities you have to invest, the return on investment may be higher than what you could achieve investing in purchasing you own medical office space.
  5. Flexibility – Should your practice expand and outgrow your current building, it is easier to move on to larger offices and visa versa.
  6. Time – as a medical practitioner, your workload is often full. Adding owner and property manager to your tasks can impact the time you devote to your practice.

Once you have made the decision to lease, you need an experienced professional to help you pick a prime location for your practice. Please contact us for more information on  medical office space.

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Buy or Rent Office Space? What should you do?

Buy or rent office space DecsionWhether a company is an established business or a fledgling start-up, saving money is always a good way to impact the bottom line.

So the question of whether to buy or rent office space eventually comes up in evaluating your options. Since most businesses start off renting, the question is usually whether or not to stop renting office space and purchase either their existing office or moving to a new facility.

There are many factors that go into the decision of whether to buy or rent office space. Here are a few of the most important factors a company should factor into their decision.

  1. Cash Outlay – A mortgage will require a down payment of at least 10%, on an SBA loan, but more often will cost up to 25% of the purchase price. The cost outlay of renting is usually just the first and last month’s rent.
  2. Opportunity Cost – Since a down payment is a considerable amount of cash, a company will have to consider the cost of missing out on the resources being allocated elsewhere. What sort of return could you expect on the money invested in real estate vs. your potential return from the real estate investment?
  3. Fixed vs. Variable Cost – When a company purchases a building, the costs are pretty much fixed, especially if that company has a fixed-rate mortgage. This is not the same if you lease, since prices depend on the market.
  4. Growth Considerations – Are you an established company or are you in a growth phase? Are you looking to add more equipment, staff, etc.? Renting office space would offer more flexibility for the future. If you are more established, then this need is obviously less important.
  5. Property Management – Managing a property (i.e. repairs, lawn care, etc.) costs money. If you don’t do it yourself, you will have to contract it out to someone else, which will be added to operating costs. Many companies curtail this cost by buying more space than needed and then renting it out to other businesses.
  6. Appreciation – One of the main advantages of owning office space is that the building’s value will appreciate over time. On the flip side, renting is essentially an expense with no return from an investment standpoint.
  7. Tax Factors – Lease payments are fully deductible, while expense on an office needs be written off over many years. However, if you own an office then you can deduct all interest payments and take depreciation on capital improvements.

The Next Step

Most of the rent or buy office space factors can be calculated by the business owner, but it is a good idea to consult a commercial real estate professional to get a better idea of your options.  Still, the final decision rests with the business owner, so it is important to run a cost-benefit analysis.

If you are looking to buy or rent office space, contact us on our website to see how we can help you meet your needs.

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5 Keys to Obtaining a SBA Guaranteed Loan to Finance Commercial Real Estate

SBA loans for financing commerial real estateSmall business administration (SBA) guaranteed loans are an excellent resource for small businesses to obtain favorable loans for both leasing and to finance commercial real estate for owner occupants. What many people are unfamiliar with related to the SBA loan programs is that there are two programs in which small businesses may be eligible to participate for the finance of commercial real estate. Before considering which program to consider in obtaining financing, the first key in obtaining a SBA guaranteed loan is understanding the general eligibility requirements for the loan programs available.

  1. Know the SBA guaranteed loan eligibility requirements:
    1. Your business must be a for profit business. Nonprofits are not eligible
    2. Your business must be considered a small business by the SBA. In order to do this you must have a tangible net worth of less than $15 million and have a net average income for each of the previous two years of less than $5 million
    3. You must be doing business in the US
    4. You should show you will be creating or maintaining jobs
    5. You must have a reasonable amount of equity in your business.
    6. You must demonstrate a need for the loan proceeds and have a sound business purpose for the funds.
    7. You must demonstrate that you are unable to get a similar loan elsewhere.
    8. Finally, you cannot be delinquent on any existing debt obligations to the US government
  2. Understand the loan programs available:
    1. The SBA 504 program is designed financing fixed assets for healthy, growing businesses. This includes 51% plus owner occupied real estate or machinery and equipment. The program allows for a typical down payment of only 10% on long-term loans. Loan amounts can range from between $200,000 up to $20 million or more.
    2. The SBA 7(a) can also be used to purchase commercial real estate, assist in the acquisition, operation or expansion of existing business. They can also be to purchase equipment, machinery, furniture, fixtures, supplies, materials, as working capital or occasionally to refinance existing business debt. It can also use be used for tenant improvements on leased properties. The maximum loan amount is $5 million. In 2012 the average loan was $337,000.
  3. Finding a lender: Work with a SBA Preferred Lender. These are lenders have the most experience in working with the SBA and in most cases have the ability to make SBA guaranteed loans on their own, based upon their own review, without the SBA reviewing the application. All they need to do is get an assignment of loan number from the SBA. You can find a list of preferred lenders online.
  4. Qualifying for a loan:  Many borrowers who would technically not qualify for a conventional loan, which may require 20-25% down to purchase Commercial Real Estate, may very well may qualify for a SBA 7(a) or 504 loan with only 10% down, if the down payment is an issue for the borrower in obtaining a conventional loan. The lenders use their same lending criteria with the SBA guaranteed loans as they do with their own loans. So, there are still hoops to jump through and you need to show that you can pay the loan back. It is actually the lender making the loan, not the SBA. The guarantee by the SBA allows for better loan terms and lower risk to the lenders.
  5. Prepayment penalties: SBA guaranteed loans have a declining 10 year prepayment penalty built-in to the 504 program guaranteed loans. Currently it is 2.52% during the first year and then declines by 10% each year after that. The 7(a) has a 3 year declining prepayment penalty: 5 % year 1, 3% year 2 and 1% year 3 on loans over 15 years.

These are the basic keys to obtaining a SBA guaranteed loan to finance commercial real estate. There are many more details that have to dealt with, another good reason to work with a preferred lender. While much of this may seem complicated to many of us, most of the preferred lenders have loan officers who only work on SBA guaranteed loans and can simplify the process significantly for applicants.

Find out more at SBA Experts

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3 Reasons to Lease Medical Office Space vs. Buy

Buy or Lease Medical Office Space DecsionMany practices own their office space, but it’s surprisingly common for them to choose rental or leasing options instead. Here are a few of the top reasons to look for to lease medical office space instead of buying it outright:

  1. There’s no need for a substantial down payment. Even for established practices, the need for a big down payment can be a deal-killer. This is especially true in cities, where office space is at a premium. By renting, you can get into areas that would otherwise be unaffordable.
  2. Medical office buildings have the basic infrastructure you need. When you buy a building, you will usually end up having to make substantial upgrades and customizations before it’s ready for you to move your practice to the new location. The same is true if you lease generic office space. Medical buildings, on the other hand, usually have things like upgraded electrical systems already in place.
  3. Renting allows access to office space in areas that are already fully built out. In large cities, it can be impossible to find a location to buy. This is especially true if you want to be downtown or in another busy area. By renting, you can obtain space in a high-rise or dedicated medical center that simply wouldn’t be available any other way.

These are just three of the reasons that choosing to lease medical office space can be the perfect solution for your practice. Patient preference is another big factor to keep in mind. Many people prefer to go to doctors who are in medical centers because it is convenient to do so. Someone who needs to see more than one type of doctor will be glad to have them all in one place. Medical centers also give a solid impression that is hard to match with a standalone building.

To find the latest openings for medical office space, just contact us. We’ll be glad to help you find the properties that best meet your needs.

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Buy vs. Lease Medical Office Space?

Buy or lease medical office space DecsionDeciding whether to purchase or lease medical office space is a big decision. To help you, below are a few of the advantages offered by both purchasing or leasing medical office space.

Leasing Advantages

  • A lease requires less capital investment than buying. This can be a big advantage to new practices trying to get established.
  • The terms of a lease can offer flexibility that buying cannot. For example if you are unsure about an area, a lease can allow you to try out your practice at that location before investing in buying medical office space.
  • If you lease medical office space, it can help get you get a more attractive office or location. If you think a great location is out of your price range, a lease might make you reconsider this assumption.
  • You can lock in your rate. After all the whole point of a lease is to agree to pay a set fee to use a space for the duration of the lease terms. So if you find a hot up and coming location, you can get a good rate before rents rise any further.

Purchasing Advantages

  • You have more long term control over office space costs. If you buy in a down market or before an area becomes popular, you can find yourself with an office space that is worth more than you paid.
  • There are tax incentives for buying. Although they are not as good as they used to be, they can still be significant enough to matter when it comes to the costs at your practice.
  • There are situations where you might want an office space in a specific location but there are no spaces available for rent. In this case purchase might be the only option other than finding a different location.
  • If your practice grows, it can be easier to make renovations or changes if you own your space. If you lease a space than any changes that are made must be approved by the owner. Also when you own your space you are more likely to make those same renovations because you are investing in something that is truly yours instead of someone else’s property.

Whether you want to buy lease medical office space, OfficeFinder has helped many medical practices find the office space that is ideal for them, Contact us and let us get started finding the perfect office for you.

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Is Now A Good Time to Buy Office Space?

Do you think you may be ready to buy office space for your business? If you’re looking to acquire office space for your business, you will need determine your needs before signing on the dotted line. If you are considering buying office space to house your business, you will need to have a clear vision of your future office space needs and also to consider these factors to decide if now is a good time buy office space.

Lease or Buy Office Space?

When deciding to lease or buy office space, two important factors to consider are cost and interest rates. Leasing a 2,000-square-foot, $100,000 office for your small business would cost you in the ballpark of $1,000 a month with few additional costs, Microsoft Business reports. Contrarily, buying that same property would require a $10,000-plus down payment along with closing costs and building inspection fees. For a more detailed comparison on whether to lease or buy office space visit our our Lease vs. Buy Pros and Cons.

But buyers can’t ignore the low interest rates the U.S. has been experiencing over the past five years. And when you buy, you know exactly what your monthly payment will be every month; conversely, if your lease contains a clause providing for it, your rent could increase as the Consumer Price Index rises or other specified increase.

In addition, the U.S. Financial Accounting Standards Board and London’s International Accounting Standards Board recently enacted new regulations that frame leases as liabilities, as opposed to assets, on balance sheets. But push-back from analysts and business owners forced regulators to scale back their initiatives, at least temporarily, according to the Wall Street Journal. The final version of the new regulations is expected to be re-visited in March, when the two bodies hold another joint meeting. But if you can use your savings or liquidate future structured settlement payments to come up with a down payment, you should at least talk to a good commercial real estate agent to determine what kind of deal you can get.

Funding

The Small Business Administration offers two popular loan programs, the SBA 7a Loan and SBA 504 Loan. A number of nonprofit organizations, like Accion USA and Association for Enterprise Opportunity, offer direct loans to entrepreneurs who could not otherwise get bank financing.

If you would like to find out more about finding office space for sale and whether or not you to buy office space for your business, please contact us for a free, no obligation consultation with one of our OfficeFinder professionals. We will put you in contact with one of our top local specialist to help with your needs.

By: James Osgood

By: James Osgood