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Tuesday / August 16.
HomemibusinessTo Buy or Not to Buy Your Practice Premises?

To Buy or Not to Buy Your Practice Premises?

To buy or not to buy your practice premises? It’s a purchase conundrum many eye care professionals face when deciding to set up their own practice… This second part of a three-part series draws on excerpts from BOQ Specialist’s recently developed Guide to Practice Ownership to assess the pros and cons, on both a practical and financial level, when deciding whether to rent or purchase a practice premises. Part three will appear in our February 2017 issue.

Deciding whether to buy or rent the premises for your eye care business might be one of the most important decisions you face in your professional career. In this low interest rate environment, the prospect of buying a practice premises could make more commercial sense than you think. Of course, practice ownership is a major, multi-faceted decision that requires careful business and financial planning – but you don’t have to go through it alone. Our team assists clients who are purchasing practices on a daily basis – these are just some of the pros and cons to weigh up when considering the practice purchase conundrum.

In Control of Your Own Destiny

Renting gives you time to assess whether the location – or a particular neighbourhood – is exactly right for your practice. It allows you the flexibility to re-assess your decision over time, without the long-term commitment associated with buying. This more agile way of operating also enables you to move away from the competition if the need arises, or relocate to reflect changes in the local demographic.

However, when you rent, you are likely to have limitations on the improvements you can make and the property owner may not be as prompt as you would like them to be on maintenance and repairs. Of course, it’s sensible not to make significant improvements on an asset you don’t own.

Renting gives you time to assess whether the location – or a particular neighbourhood – is exactly right for your practice

There is also a risk that the owner may decide to increase the rent beyond your means or sell the property. This could mean moving at an inconvenient time and leaving tens of thousands of dollars of investment behind in your rented practice.

Owning your own practice premises gives you the freedom to model your consultation rooms and layout to reflect your own taste, without the risk of potentially losing the investment in setting up in your preferred layout through a forced move.

Ownership also means you can invest with confidence in fit-out improvements and equipment, knowing these improvements will add to the value of your practice. This will assist both with any potential exit strategy and the appeal to prospective clients and future buyers.

Continuity is Key

While it may sound simple, continuity can be a major crunch factor for both clients and staff. Practice premise ownership gives you a long-term address, allowing you to have security of tenure and most importantly, a familiar environment.

In a highly competitive market, eye care professionals need to be doing all they can to build and maintain their client-base in their communities. By purchasing your own practice and by staying in the same location for a number of years or even decades, you are making it easier for your patients to repay you with their loyalty.

Financially Practical

On the surface, renting might appear to make more financial sense for an early stage business, given the flexibility to easily relocate as your practice grows and in most cases, the low barriers to entry.

Renting might also give you access to capital you may need elsewhere in the business, as you will spend less of your monthly earnings on financial responsibilities that come with owning. These include items such as building insurance, maintenance and repairs.

On the flip side, buying your own practice can be as financially practical as renting. With the right financier, the deposit you need for your original loan may be close to the bond required for a rental property and loan repayments on your mortgage may often be no higher than rent. Although buying your own practice premises means you will have a long term financial commitment (including with taxes, insurances and maintenance) it’s important to remember that mortgage repayments are a direct investment in your business. Any upward changes in price can result in increasing equity you can borrow against.

Regardless of where you’re leaning with your decision, there are plenty of financial specialists on hand to help you navigate the considerations and decide what’s right for you.

To Find Out More

BOQ Specialist’s Practice Purchase Guide is designed to help you navigate the process of owning a practice that’s right for your future plans and to help you understand the financial options available. To download a copy, visit www.boqspecialist.com.au/expertise/guides/practice-purchase-guide. Alternatively, call (AUS) 1300 131 141 to speak with a financial specialist.

Dr. Brett Robinson is the CEO of BOQ Specialist. A qualified medical professional, he has many years of experience in financial services.

The information contained in this article is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. BOQ Specialist is not offering financial, tax or legal advice. We recommend that you obtain independent financial and tax advice before making any decisions.