When it comes to setting up a medical or healthcare space, you have two options—lease or buy. But which one is the best option?
In Vancouver, BC specifically, the decision can be complex and overwhelming. There are several elements that you should keep in mind such as location, tax incentives, and costs. That’s why Klein Commercial is here to help you understand the advantages and disadvantages of leasing versus buying medical or healthcare space in Vancouver BC.
Leasing a space has a few distinct advantages for someone who is looking for a medical or healthcare space in Vancouver BC.
Location matters. By leasing your medical office space, you open the chance to be situated in a desirable area with a great reputation — both of which are essential for some medical practices. Moreover, leasing space in high-traffic areas is usually more cost-effective than buying outright.
Less capital investment. Leasing does not require a large capital investment upfront which means that you do not need to spend large amounts of money just to get started. This is great for new or small practices that do not have the capital to purchase a property.
Flexibility. Leasing a medical office space can provide you with the flexibility to easily switch locations when needed. This is great for practices that are growing and need to expand into a larger space rapidly or those that need to downsize and relocate.
Tax incentives. With leasing, you can often take advantage of various tax incentives. You can often deduct your rental payment as a business expense, which can greatly reduce your out-of-pocket costs.
Less unforeseeable costs. With a lease, you can better predict the amount you will pay each month since the terms are fixed and known at the beginning of the lease. The only surprise costs that you may encounter would be minor repairs, some of which may be covered by the landlord, depending on your lease agreement.
Not owning the space. One of the major disadvantages of leasing medical office space is that you do not own the property, meaning that you will have to pay rent and may be subject to changes in your lease agreement if the landlord decides to increase the rent.
Lack of control over changes. If you lease your medical office space, you do not have the control to make changes to the space. Any modifications or improvements that you need to do must be approved by the landlord, which can be a lengthy and expensive process.
Risk of losing patients. If the landlord decides to increase your rent or terminate your lease agreement, you may be forced to relocate. This can be disruptive for your practice as you risk losing patients if they are unable to find you in a new location.
On the other hand, there are several advantages to buying medical or healthcare space in Vancouver BC instead of leasing it.
Build wealth. The primary benefit is that when you own the property outright then all future profits from renting out the space will go directly back into your pocket without having to worry about paying off a landlord every month.
Control over appreciation. One of the biggest benefits of buying property is that, as the value of the property increases over time, you reap all the benefits. This can be a great way to increase your wealth and build your net worth over the long run.
Owning property tends to appreciate over time meaning that if you ever decide to sell then you could potentially make a significant profit depending on market conditions at the time of sale.
Ownership and control. When you buy property for your medical practice, you own it outright. This gives you more control over how the space can be used, what changes you make to the space, and how much rent you charge.
Tax deductions. Additionally, owning property can also provide certain tax incentives such as being able to deduct mortgage interest, property taxes, and more from your taxes each year which can help reduce your overall tax burden significantly over time.
Additional income. If you own your medical office, then you have the opportunity to rent out any extra space. This is a fantastic way to generate more income. Additionally, if you decide to close your practice in the future, you can still keep the property and use it as an ongoing source of income by renting it out.
Pay yourself rent. A clever way to build income is to purchase the building, then have your practice pay rent to you. If you establish ownership of the building by putting your corporation as the owner, then pay rent to that same corporation, all practice expenses and mortgage payments come out of that rent. Anything leftover is considered your income.
However, there are also a few drawbacks to consider when deciding whether or not to buy medical office space in Vancouver BC.
Commitment and financial responsibility. Buying property is a significant commitment and requires financial resources and responsibility. You will be responsible for the upkeep of the property as well as any repairs that may need to be done, which can become costly over time.
Risk of declining value. Buying a property also carries risk as there is always the possibility that its value may decline due to economic conditions or other factors. This can result in losses if you decide to sell.
Higher up-front costs. Buying a property comes with higher upfront costs such as the down payment, closing costs, and other fees associated with purchasing a property which may not be necessary when leasing space.