Buy or lease medical office?

By Chase Farache, Broker Associate, Silver Lining Realty Group. Updated October 2026.

The core trade-off

Leasing buys flexibility. You can expand, shrink or move at the end of the term, your capital stays in the practice, and the landlord carries the building's capital risk (roof, structure, systems) unless the lease shifts it to you.

Owning buys control. You set the build-out, you are not exposed to a landlord's rent increases at renewal, and the practice or its owners build equity in the real estate. In exchange, you take on the down payment, the mortgage, and every repair and replacement, plus the risk that the building no longer fits the practice in ten years.

For many physician groups the deciding factors are not financial: how certain they are about staying in one location, whether partners agree on long-term plans, and whether the right building is available where their patients are.

How owner-users usually finance: the SBA 504 loan

The U.S. Small Business Administration's 504 program provides "long-term, fixed rate financing for major fixed assets." Per sba.gov:

• Eligible uses include buying, constructing or renovating buildings or land, and long-term machinery and equipment.
• 504 loans are made through Certified Development Companies (CDCs), which SBA certifies and regulates, working alongside a senior lender.
• Maturities of 10, 20 and 25 years are available.
• Rental real estate is excluded, and loans cannot be made to businesses engaged in passive or speculative activities. The building must house your operating practice.
• Borrowers must be operating, for-profit businesses that meet SBA size standards.

Occupancy and equity requirements are set in SBA's program rules, and lenders apply their own underwriting. Ask a CDC and your lender for current requirements before you make an offer.

Florida costs that differ when you own

• Documentary stamp tax. Florida taxes deeds at 70 cents per $100 of consideration (s. 201.02, F.S.). Who pays it is negotiated in the contract.
• Property tax reset. Certain nonresidential property in Florida has a 10% annual cap on assessment increases, but under s. 193.1555, F.S., it goes back to just value as of January 1 after a change of ownership or control. Budget your taxes on the purchase price, not the seller's bill.
• Payment timing. Taxes are due November 1 and delinquent April 1 (s. 197.333), with a discount of up to 4% for paying in November (s. 197.162).
• Insurance and roof. Get property insurance quotes during due diligence, not after closing, and ask insurers what they need to see on the roof and wind protection.
• Condo or association fees if you buy a unit in a medical office condominium. Read the declaration, the budget and the reserve schedule.

When you lease, most of these costs still reach you through NNN or CAM charges, but the landlord manages them and absorbs capital projects unless the lease says otherwise. See NNN vs gross leases.

Tax points to raise with your CPA

This is general information only. IRS Publication 946 explains depreciation of business property, and states that land is not depreciable. The building portion of a purchase is recovered over time through depreciation, and the publication describes qualified improvement property as improvements to the interior of nonresidential real property placed in service after the building was first placed in service. Rent expense is covered in IRS Publication 334.

Many physicians hold the real estate in a separate entity that leases to the practice. That structure has legal, tax and lender consequences, so set it up with your attorney and CPA before closing. When you eventually sell, a like-kind exchange under Section 1031 may defer gain if the property is held for business or investment use; see the seller's guide for the IRS timing rules.

A side-by-side framework (hypothetical numbers)

The numbers below are invented to show the method. They are not market prices, rents or rates.

A hypothetical practice needs 3,000 square feet for ten years. Option 1 is a lease at an all-in occupancy cost of $36 per square foot in year one, rising 3% a year. Option 2 is buying a 3,000 square foot condo unit for $1,200,000 with 10% down.

• Lease, year one: 3,000 x $36 = $108,000. Over ten years at 3% a year, roughly $1.24 million in total occupancy cost, with no equity at the end.
• Buy: $120,000 down plus closing costs, then debt service, taxes (reset to the purchase price), insurance, association dues, repairs and reserves each year. At the end you own an asset whose value could be higher or lower than you paid.

The right comparison is after-tax cash out of pocket each year plus the expected value of the building at year ten, against the after-tax cost of leasing and what the down payment would have earned in the practice. Run it with your CPA and lender using real quotes; I can supply actual lease comparables and recent sales for the buildings you are considering.

Decision checklist

1. How certain are you of the location and size for 10+ years?
2. Do all partners want to own real estate together, and is there a buy-sell agreement?
3. Can the practice spare the down payment and a repair reserve without straining working capital?
4. Is there a building for sale where your patients are, with the zoning, parking and plumbing you need?
5. Would a long lease with renewal options and a fixed escalation give you most of the control at less risk?

Browse commercial property for sale or medical office space, see Fort Lauderdale medical office, or read leasing medical office. Call or text (561) 715-7222 to compare real options.

Not legal or tax advice. Laws, codes and local rules change; confirm current requirements with your attorney, CPA, architect or the permitting office before you act.