Lacy Milani-Ingalls | Director of Healthcare Real Estate Services
Owning a medical or dental property can indeed be a lucrative investment that provides both steady income and potential value appreciation over time. With the ongoing surge in demand for these types of professional spaces, your business’s property asset is poised to appreciate substantially over time, provided you maintain careful management and upkeep to ensure continued growth potential.
Benefits of Owning Medical Property
- Tax Advantages
When it comes to tax benefits, medical offices have an advantage over traditional offices, with substantial perks. For starters, medical facilities often get special deductions and credits that other types of businesses just don’t qualify for. Plus, they can write off a lot of their expenses related to patient care, equipment, and even renovations. It’s like having a little extra cushion that helps with the bottom line.
- Build Up Equity
Investing in real estate allows you to leverage the equity you’ve built up, enabling you to purchase more properties than you could otherwise afford. This can potentially increase the overall value of your real estate portfolio.
- Commercial real estate typically appreciates by 3% annually. As you pay down the mortgage and build equity, the value of your property increases concurrently. For example, a $2 million building purchased today would be worth approximately $3.6 million in 20 years.
- Maintain Full Control:
Owning the building gives you complete control over your property and business environment, whereas if you were a tenant, you have limited control over your business location. Your landlord can easily replace you with a preferred tenant, leaving you without a space for your operations. Additionally, the landlord may neglect necessary building maintenance and upgrades, which could negatively impact your business.
- Cushion for Economic Downturns
Having real estate assets can provide a financial safety net during economic downturns. The cash flow from rental income or the ability to sell or refinance properties can provide liquidity when needed.
Scenario.
You purchase a building individually or with a partner, and you set up your business to occupy 51% of the building as a tenant paying you rent.
As your business pays rent on the building, you steadily pay down the loan and build equity. Most commercial loans use a 20-year amortization period. So, if you operate the business for 20 years with the rent payments covering the loan (plus some extra for your cash flow), you will own the property outright. When you’re ready to retire, you can either refinance the building for a cash injection or sell it entirely, setting you up for a comfortable retirement.
In Conclusion:
Overall, medical real estate investing is a strategic approach that combines asset security with the potential for revenue generation and long-term growth, while also offering various tax advantages that can significantly enhance your financial health.