Four Reasons Why Medical Practitioners Should NOT Own Commercial Property
Commercial property can often be a great investment for those in the medical community. Many ponder whether or not to enter the world of property ownership. Others are property owners and have the property tax bills to prove it!
After spending more than a decade in commercial property consulting, we have identified four common reasons why Medical Practitioners should not own commercial property:
1. Too Successful in their Field
Due to the highly specialized training and education necessary to participate in the medical field, most practitioners are solely focused on the business of medicine leaving no time to focus on the business of business. Often those in the medical arena find success and thus fail to focus on the financial components of their practice. Remember, the success of your practice is due to the team you have in place with each member playing his or her part. Likewise, a full team of specialists is required to maximize your investment in commercial real estate.
2. Lack of Tax Knowledge
Have you ever uttered the phrase, “My CPA handles my taxes?” If so, you should not own commercial property.
When it comes to the unique tax issues that revolve around property ownership, you need a diverse financial consulting team in place. Many owners do not have enough information even to choose the correct entity structure for their property. Those in the medical community are highly educated in the specialized areas of their practice however, extremely limited in taxation acumen. To compensate for this, they often blindly trust their CPA representation to handle all financial matters. Unfortunately, CPAs lack expertise in the specialized areas of the tax code as it pertains to commercial property ownership.
If you or your CPA has not aligned yourselves with outside expertise in specialized areas such as: Procurement of Tax Incentives, Accelerated Depreciation, Property Valuation, and Energy Efficiency Incentives – you should not own commercial property.
This leads us into…
3. End Up Paying Way too Much in Taxes
The government has done a reasonable job at providing tax incentives for property owners. The problem; they don’t know how to disseminate information to the beneficiaries. In other words, the government passes a bill and those that were intended to benefit don’t get the memo! Because of this, owners of property end up paying much more than they should in taxes. Additionally, property tax valuations across the nation are completely out of whack due to the recent recession. Properties are simply not worth the amount they are being assessed. If you are not an expert in property valuations and assessments, you either need to find one or stay out of commercial property ownership.
4. Energy Inefficiency
Is the building energy efficient? Will the state or federal government require it to be? How much are the utilities truly going to cost?
Utilities are a bottom line expense and often completely out of the owners’ control. Most in the medical community have no knowledge of how to manage this expense. Even fewer are privy to the conservation products on the market. If you are unfamiliar with terms such as: Energy Metering, Power Factor Correction, Kilowatt-hours (kWh), or Demand Rate; you definitely should not own a commercial property.
In conclusion, property ownership is not for the faint of heart. If you own property or are thinking about jumping into this world, you should consult a firm with expertise in all of the areas listed above to ensure your investment will perform as intended.
If you would like more information on how to maximize your investment through tax strategies and energy conservation products, there are free consultations available for you. Contact us for more information.
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