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subject: Should You Lease or Purchase Your Office Space [print this page]


Should You Lease or Purchase Your Office Space

Many nurse practitioners have asked this question over the years "should I lease my space or purchase my space?" There is, of course, no one correct answer to this question as both have their advantages. The answer for each NP will vary depending on his/her goals and resources. Let's take a look at the advantages for each of these options.

Initial Cost: With the purchase of a building, your initial cost will usually be significantly higher when you take into account the down payment and closing cost of purchasing. Keep in mind however, this may change depending on how you are able to purchase the property. Occasionally your initial cost will be much less.

With a lease, you may be required to have a first and last month's payment plus security deposit- essentially three months worth of payments.

Time to Occupancy: This can vary greatly depending on what needs to be done to have the space ready once it's in your name (lease or mortgage.)

Remodeling: If you purchase the building, this is obviously your cost as the owner. If you are leasing, it may or may not be included. Tenant improvements are certainly an area you will want to negotiate on.

Repairs and Maintenance: Again, as the building owner, it falls to you. If you lease, it may fall to the building owners, depending on what it is and what you have negotiated.

Sublet the Space: As the building owner, you want to sub-let space-- it will help reduce your overhead. As the leaseholder, you may or may not be able to do so. This is also an area in which you can negotiate.

Neighbor Control: If you own the building, you can to some extent, control who is in your building. In other words, you have control as to the appropriateness of the other businesses in the building, keeping them complimentary and not competitive. As a lease hold, you will not have any control to who becomes your neighbors.

Tax Advantages: As the building owner, you obviously will enjoy some tax advantages.

Long Term Payoff: As the owner, this is one way you can diversity your income and holdings. If you rent the additional spaces out to others, this gives you "passive"? income and reduces your overhead considerably. Consider this: If you pay $2,000 per month on your lease now, in five years that means you would have paid $120,000 in lease payments. It's definitely something to consider as part of your long-term strategy.

So an answer to should you own your own building? It really depends on your own goals. If you plan to stay in one place for a long time, have the resources to consider purchase of your space, and can shoulder any associated risks, then this is definitely something to consider.

2011, Barbara C. Phillips, NP. All Rights Reserved.




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