At some point most successful practice owners consider buying their building. The case is intuitive — stop paying a landlord, build equity, control the space. It is also often made on the wrong numbers, comparing a mortgage payment to a rent check and stopping there.
Occupancy cost per session is the operating metric
Whatever the ownership structure, the practice should know its occupancy cost per completed session — rent or debt service, plus taxes, insurance, maintenance, utilities, and any tenant-improvement amortization, divided by sessions. That number belongs in session-level economics regardless of who owns the building, and it is the basis for comparing options.
Worked example
A practice leases 4,200 square feet at $28 per square foot gross ($117,600 a year) and delivers 11,800 in-person sessions annually — about $10 per session. The building is available to buy for $1.45 million.
| Continue leasing | Buy (owner entity leases to practice) | |
|---|---|---|
| Annual occupancy cost to the practice | $117,600 | $126,000 (market rent paid to owner's real estate entity) |
| Owner cash required | $0 | $290,000 down payment (20%) + $40,000 closing and reserves |
| Debt service (25-year, 7.1%) | — | $99,500 |
| Taxes, insurance, maintenance | in rent | $31,000 |
| Owner real estate entity net cash flow | — | −$4,500 (year 1) |
| Principal paydown (year 1) | — | $17,800 |
| Equity build (paydown + modest appreciation at 2%) | — | ~$46,800 |
| Flexibility if space needs change | High (lease term) | Low (sell or re-let) |
Illustrative figures for a hypothetical practice; not a client's data.
The purchase is roughly cash-neutral to the owner in year one while building about $47,000 of equity — a reasonable return on $330,000 invested. But the analysis only holds if the practice will occupy this space for the long term. The same practice shifting 40 percent of sessions to telehealth, or outgrowing the building in three years, owns a real estate problem instead of a clinic. The decision is as much about the practice's five-year space plan as about the numbers above.
Structure it correctly
The real estate should sit in a separate entity that leases to the practice at market rent. That keeps the practice's operating margin honest, protects the building from operating liabilities, allows the owner to sell the practice without selling the building (or vice versa), and gives a future buyer of the practice a clean lease rather than a real estate negotiation.
The questions before the numbers
Will the practice need this footprint in five years? What share of sessions will be in-person? Can the space be reconfigured or sublet? Is the owner prepared to be a landlord — with the capital calls a roof or system replacement brings? Does the owner have better uses for $330,000, such as hiring or acquisition?
What we would do in the first 30 days
- Compute current occupancy cost per session and project the five-year space need from the utilization and modality plan.
- Build the lease-versus-buy comparison with realistic financing terms, operating costs, and a sensitivity on occupancy.
- Model the separate real estate entity and market-rent lease structure with counsel and the tax advisor.
- Compare the return on the down payment to the return on the same capital deployed into hiring or acquisition.
- Present the decision with the five-year space plan attached, not as a standalone mortgage-versus-rent calculation.