Lease vs. Own for Doctors: Building Long-Term Equity with Medical Office Space
Why More Doctors Are Considering Ownership
In recent years, many medical professionals across the Conejo Valley and greater Los Angeles area have shifted from leasing to owning their office space.
Ownership offers stability, control, and long-term equity, especially for doctors planning to remain in the same location for seven years or longer.
Meanwhile, rising lease rates and limited Class A medical inventory have made ownership increasingly attractive — particularly when SBA financing is available with just 10% down.
Comparing the Two Paths
Leasing – When Flexibility Matters Most
Leasing a medical office space keeps your upfront costs low and allows room to pivot as your practice evolves. You’ll typically cover rent, operating expenses, and annual increases—but won’t build equity over time.
Best for: New practices, short-term growth phases, or testing a new market.
Pros:
Lower initial investment (security deposit and basic improvements)
Easier relocation or expansion
No responsibility for major maintenance or property taxes
Cons:
Rent increases over time
Limited control over improvements and signage
No ownership or equity growth
Owning – When You’re Ready to Build Long-Term Equity
Owning gives physicians stability, control, and long-term wealth creation. With SBA 504 or 7(a) loans, doctors can purchase with as little as 10% down while locking in predictable payments.
Best for: Established practices ready to commit to one location.
Pros:
Builds equity and property appreciation
Full control of design, signage, and operations
Tax advantages through depreciation and mortgage interest
Stable monthly costs over time
Cons:
Higher upfront costs and closing fees
Long-term commitment to the property
Responsibility for maintenance and capital expenses
Summary
Leasing is ideal for flexibility and lower initial costs.
Owning rewards stability and wealth-building over time.
Your decision should align with your practice’s 5–10 year plan and financial goals.
How SBA 504 and 7(a) Loans Empower Medical Buyers
The SBA 504 program is designed for owner-users who occupy at least 51% of the building.
Down Payment: as little as 10%
Loan Terms: up to 25 years fixed
Rates: generally below conventional loans
Use of Funds: building acquisition, build-out, and medical equipment
The SBA 7(a) option allows slightly more flexibility for smaller spaces or mixed-use needs.
These loans let physicians keep cash available for staffing, technology, and marketing — while still building ownership equity over time.
Financial Comparison Example
Let’s look at a simple scenario for a 2,500 SF medical office suite in Thousand Oaks to compare the difference between leasing and owning over time.
Leasing Scenario
Monthly rate: $3.50 per SF, Modified Gross
Annual cost (Year 1): ≈ $105,000
Typical rent increases: 3% annually
10-Year total cost: about $1.2 million
Equity built: none
Leasing remains straightforward and low-risk in the short term but provides no asset value or ownership return. Over time, rent escalations outpace equity growth opportunities.
Ownership Scenario
Purchase financed with 10% down SBA 504 loan
Net monthly cost (after tax benefits): ≈ $1.25 per SF
Annual payments: ≈ $45,000 (net after deductions)
10-Year total: ≈ $550,000 in payments
Equity built: ≈ $300,000 through loan paydown and appreciation
Ownership requires more upfront capital but often delivers significant long-term savings and wealth creation — especially when property values rise 3–5% annually, as seen in the Conejo Valley medical office market.
Takeaway
Leasing may appear easier initially, but ownership can cut total costs in half over a decade while building a valuable retirement asset. Even when factoring in maintenance and taxes, the long-term advantage typically favors owning for established practices.
When Leasing Still Makes Sense
Leasing remains a smart option when:
You’re testing a new market or sub-specialty
Your practice is expanding rapidly and future size is uncertain
You prefer to avoid capital investment during early growth
You need short-term flexibility before committing to a long-term mortgage
Landlords in the Conejo and San Fernando Valleys often offer TI allowances, free rent, or flexible terms for creditworthy medical tenants — giving you time to grow into ownership later.
Benefits of Ownership Beyond Monthly Savings
Owning provides more than financial gain:
Control: You decide layout, signage, and building upgrades
Tax Advantages: Depreciation, interest deductions, and potential 1031 exchanges
Retirement Strategy: Rent the building to your practice entity post-retirement
Asset Appreciation: Conejo Valley real estate historically appreciates 3–6% annually
For physicians, this means transforming overhead into a wealth-building investment
Next Steps: How to Evaluate Your Options
Review your practice’s 5–10 year plan.
Meet with a CRE broker who understands medical use and SBA lending.
Analyze a lease-vs-own scenario using real interest rates, rent trends, and property comps.
Tour both existing medical condos and small professional buildings available for purchase.
I provide personalized Lease vs Own analyses and can connect you with SBA-approved lenders who specialize in healthcare.
Considering Buying or Leasing in the Conejo Valley?
If you’re a physician or healthcare provider evaluating your next move, I can help you compare local lease rates, ownership opportunities, and financing options throughout the Conejo Valley, San Fernando Valley, and surrounding Los Angeles markets.