(209) 551-1888
Located in Modesto, CA
Services in Plastic Surgery, Veins, Acupuncture, and General Surgery
Disclaimer - use at your own risk. I'm not a financial expert by any means. Please consult your own financial advisors regarding these issues. Underconstruction - more stuff coming soon.
The considerations for renting or buying an office space is something a startup practice usually things about. It's also one that a seasoned medical practice thinks about. I don't have all the answers, but these were some of the considerations I thought about before we leased our office space:
Upfront costs are a lot more when buying a property right from the start.
If you have your own building/space (buy), you have a good idea what your costs are going to be year after year, especially with a fixed rate loan on the property. With leasing, you are subject to landlord whims or market whims when your lease term expires. Many leases also have a clause for an annual cost increase tied into some financial measure such as the Consumer Price Index.
If you buy a space, it is harder to expand or move out if you need more space. Leasing gives one the opportunity to possibly lease the space next door or move out and lease another space.
It's much easier to move away if one leases a space
If you own your building - you would be in the business of realestate of renting out additional space or benefiting from appreciating land values.
This one is a big one. Businesses usually deduct the full amount they pay in rent. Owners of rental property can write off repairs right away. BUT improvements to commercial real estate have to be deducted over 39 years. Depreciation on commercial buildings also is taken over 39 years. The owner simply divides the total cost by 39 years and deducts the proportional amount each year. Repairs and Maintenance of the building differ from "improvements" thus are deductible in the year of the expenditure.
You could deduct property taxes and mortgage interest when you own your office space.
There are special deductions of up to $1.80 per square foot of the building for improvements to the energy efficiency of the building. These improvements must meet standards set by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE). These improvements must reduce the total annual energy and power costs by at least 50 percent in order to qualify for the deduction. This deduction is subject to change each year.
Owning your own property gives you more duties in terms of security, maintenance, etc.
Links:
http://www.irs.gov/pub/irs-drop/n-06-52.pdf Reduction of Energy Costs - deduction
About us (we don't do loans/rent/buy office space... we're a small medical office in Modesto, CA):
(209) 551-1888
Located in Modesto, CA
Services in Plastic Surgery, Veins, Acupuncture, and General Surgery
email clee [at] surgerytoday.com