Top mistakes to avoid when purchasing a medical practice

Mistakes to avoid when purchasing a medical practice


January 25, 2021


5 mins

For most healthcare practices, property is the second-highest expense behind payroll. And while this type of transaction can bring many benefits with it (hello reduced risk and wealth creation!) it can be fraught with challenges. For every strategy you should follow, there’s an equal number of mistakes you should avoid. Here are three critical errors which you should avoid when purchasing a medical practice.

Buying in the wrong location

In real estate, whether it’s residential or commercial, it all boils down to location. So, if you want your medical practice to be profitable, make sure that you’ve thoroughly researched it’s surrounds. Along with familiarising yourself on the key demographics of this locale, ask yourself:

  • Is there a need for this practice in this suburb?
  • Are there any direct competitors?
  • Are zoning changes planned?
  • Is the site well suited for the intended use?
  • What is the median household income level?
  • What are the property value trends?
  • How does the neighbourhood compare to others?

Once you’ve uncovered the answers to the above, you can accurately assess whether this is the right location or not. Failing to do so could be a very expensive mistake, indeed.

Avoid medical property buying mistakes
Avoid medical property buying mistakes

Paying too much

No one likes to pay too much for anything, but sometimes we can fall into the trap of overcapitalising. If we’re pressed for time, or putting our trust in the wrong people, it can lead to expensive errors. That’s why doing your due diligence when purchasing a medical practice is critically important to avoid a costly mistake.

Do your homework, so you don’t fall into the caveat emptor (or “Let the buyer beware”) camp. Find out what are similar properties selling for. Comparing nearby commercial sales also provides a valuable bargaining tool when you are negotiating with the seller. And also keep in mind current market conditions, which are ever-changing.

Be wary of doing everything yourself, too. Hire professional inspectors, engineers, and environmental and other consultants as part of your due diligence.

Getting the timing right

Purchasing commercial property is not a small or one-time expense. If your timing isn’t right when doing this, it could translate into a very costly mistake.

To make sure it is the right time, assess your financial stability. How is the business cash flow, and can it sustain a long-term commercial loan? Think to the future as well – do you have a cushion in place for inevitable repairs, tax and all those occupancy costs you’ll incur?

And then there’s the other timing – the market. It has its own cycle and each has its own silver living. If the market is falling, you might land yourself a bargain. If it’s flat, there might be less competition. Even in a rising market, you can still come out on top if you time it right. What’s important to remember is to weigh all these factors together and purchase at the optimum time to avoid an expensive error.

If you’re looking to invest in a practice, Medical Rooms Online is a centralised place to search for all the best properties currently for sale. For more information, click here or contact 1300 28 28 03.

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