How Inclusion of Practice Partners Reduces Real Estate Investment Risk

By Mariela Araujo - April 18, 2022

“Bad locations, negative cash flow, high vacancies, and problem tenants” are Investopedia’s four most substantial real estate investment risks. For physician investors owning their own medical building, all these risks can be eliminated – assuming one simple guideline is followed. The ownership of the practice should be aligned with the ownership of the real estate. Whenever that guideline is not followed, the objectives of the tenant and landlord begin to diverge and the aforementioned risks are given a foothold to fester.

Optimal alignment of the real estate and the practice has two consequential components – the involvement of all the practice partners and a balance of ownership among those partners. There are several benefits to achieving both goals. To easily understand the concept, consider the following potential advantages.

Tenant Improvement Considerations

Why do I have to contribute as much as my partner to improve a building in which he or she has triple the ownership? The disparity between practice and real estate ownership can be a divisive issue when improving an existing building, particularly with the rising cost of MOB and ASC build-out. This can lead to a delay of plans, poor ongoing maintenance, or complete avoidance leading to disrepair.

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