Leasing vs buying your practice rooms
By Jeremy Stagg (Photography: Supplied)
Commercial lease payments and mortgage repayments on equivalent properties are often surprisingly comparable. The difference is that one builds an asset and the other doesn't. Over 10, 15, 20 or 30 years, that distinction can translate into a very significant difference to your financial future.
In recent years the lending landscape has changed. Previously, commercial property loans usually required a 30% deposit and came with repayment terms of around 15 years. Today, doctors can access loans for 100% of the property value, often with no additional security required, and terms of up to 30 years*. This has fundamentally shifted the equation between leasing and buying for medical professionals.
That said, ownership isn't the right answer for everyone. If you're early in your career, uncertain about your long-term location, or prioritising cash flow for staffing and equipment, leasing offers genuine flexibility and lower upfront exposure. Landlord incentives such as fitout contributions and rent-free periods can also make leasing attractive when setting up or expanding a practice.
The honest answer is that the right choice depends on your stage of career, your practice model and your long-term goals. I'd encourage every doctor to speak to their accountant or financial adviser about their unique financial circumstances, because they may find that owning is more accessible, and more financially compelling, than they expected.
Buying your consulting rooms is a decision worth examining carefully, and earlier in your career than most doctors think. The Avant Finance team works extensively with medical professionals and understands the financial and practical dynamics of running a practice.
The financial case for buying
Why buying often makes more sense than doctors expect:
- Comparable cash flow: Loan repayments on a commercial property are often in the same range as lease payments on an equivalent space, but you're building equity, not paying someone else's mortgage.
- Tax advantages: Depending on how you structure the purchase, you may be able to claim deductions on loan interest, building depreciation and certain outgoings. Talk to your tax adviser about what applies to your situation.
- SMSF opportunity: Many doctors hold their consulting rooms inside their self-managed super fund, where the maximum tax rate is usually 15% during the accumulation phase, well below their personal tax rate.
- Passive income: Subletting space to complementary service providers, such as a physiotherapist or psychiatrist, can offset costs and enhance your service offering from day one.
- Retirement asset: The option to keep ownership of the premises after selling a practice provides a source of ongoing rental income.
When leasing is the smarter move
Leasing may be the better fit for doctors who want to:
- Preserve capital: Staffing, equipment or marketing can require significant investment in the early stages of building your practice.
- Co-locate with other practitioners: Partnering with other health service providers allows you to share some of the infrastructure costs.
- Maintain location flexibility: Your patient catchment or personal circumstances may change, and relocation is easier if you’re leasing.
- Negotiate landlord incentives: Set-up costs can be significantly reduced through a contribution to fitout or a rent-free period.
It really can be a case of own your rooms, own your future – but only if the numbers and your circumstances stack up.
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Avant Finance is part of the Avant Mutual Group which includes Avant Mutual Group Limited and its related entities (Avant). The information in this article does not constitute accounting, taxation, legal or other professional advice and should not be relied upon as such. Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgement, or seek appropriate professional advice relevant to their own circumstances.
*All applications for credit are subject to eligibility and credit approval criteria. Approval of any loan is subject to standard credit assessment and is at the lender's complete discretion. Terms, conditions, fees and charges apply. Contact Avant Finance for further details.