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Should you buy property for your medical practice?
To start your own medical practice, you need the right premises. Rent, or buy?
A lot of medical practices set up in commercial premises, often in buildings or developments designed to offer a range of healthcare services. But it’s also common to set up medical rooms in a house that’s been repurposed to suit the needs of the business. Unsurprisingly, the age-old question of location, location, location can play a big part in your success, because patients are more likely to visit if it’s quick and easy to find.
Judging by the number of medical practices across all disciplines set up in suburban residential areas, patients enjoy the convenience of going to a nearby medical specialist. Local amenities like coffee shops and other forms of retail therapy no doubt add to the appeal of a ‘neighbourhood’ medical practice.
And under most circumstances, a well-supported medical practice will be a successful one. Banking on this promise of success, our specialised Private Clients Medical Professionals banking team offers loans of up to 90% of the property’s value.
Benefits of investing in commercial property
Property will always be an attractive investment. It makes sense to invest in a property that you will own one day, instead of paying rent to a commercial property company.
More importantly, property tends to grow in value over time, so your asset will be worth more if you decide to sell it in 5, 10 or more years. That value will be influenced largely by the appeal of the neighbourhood the property is in. Choose wisely – you don’t want your property’s value to stagnate or fall.
Finding the right property can, and should, take time. You don’t want to choose something hastily only to rue the decision later. And most importantly, you don’t want to overextend yourself by buying a property you can’t afford.
That said, property remains a solid investment, especially property with Business 1 zoning rights. This is the least restricted category of business zoning, so almost any type of business can operate from the premises. In the right location getting lots of traffic, you should have little trouble securing a good price if you decide to sell.
Commercial property loan conditions
Depending on the type of medical practice you have, you may consider buying a residential property with outbuildings to convert into your work-from-home consulting rooms. You could do this with a residential home loan in your personal capacity. However, as your practice grows, traffic in and out of your premises may become an issue in a residential neighbourhood. You might need to apply to have the property rezoned to house a commercial medical practice on the site.
Don’t forget to budget for regulatory and compliance costs that may be involved when converting the property
There’s no guarantee that a rezoning application will be approved, however. It might be a better idea to keep your home and business premises separate and buy a commercial property. To qualify for a business loan, your practice will need to be a going concern with proven turnover, not a start-up.
Because you’re buying the property for your medical practice, this loan will be different to a residential loan in your personal capacity. For a start, the property will need to have Business 1 zoning rights for the loan to be approved, so you wouldn’t be able to convert a residence into your practice premises without first getting it rezoned.
Once you’ve found the property you want, the term of the loan is 10 years, not 20 as you’d get on your home loan. Nor are interest rates on commercial property loans as favourable as those on personal home loans. It’s best to speak to your professional banker to get an idea of the terms and rates you can expect.
You can also expect to get no more than a 90% loan-to-value offer, meaning you’ll need to come up with at least a 10% deposit to secure a loan. Another condition unique to these loans for medical professionals is that we prefer the property to be owner-occupied.
Precautions and pitfalls to consider before buying a commercial property
One of the most common mistakes is overextending yourself or underestimating how much the property conversion is going to cost you.
It helps to consult with property professionals – from valuers and architects to builders and interior designers – to get a full picture of what’s involved. And don’t forget to budget for regulatory and compliance costs that may be involved when converting the property and setting up your practice. Your personal banker can help with the financial calculations and permutations to help you make the decisions that’s right for your business.
Contact us today to find out how we can help you build your dream medical practice.
