OB/GYN Office Real Estate: Financing Your Building
For many women’s health physicians, rent is one of the largest ongoing expenses. Buying OB/GYN office real estate can turn that expense into ownership, give the practice more control over its space and potentially create a long-term asset for the physicians.
Ownership is not right for every practice, though. This article explains the trade-offs and the main financing options for buying, building or improving a medical office. Zoning, facility and tax rules vary by location, and nothing here is legal, tax or real estate advice. Physicians should work with counsel, accountants and qualified real estate professionals.
Why Physicians Consider Owning Their Office
Potential advantages of owning may include:
- Stable occupancy costs that are not subject to a landlord’s renewal terms
- Freedom to build out procedure rooms, ultrasound suites and lab space as needed
- Building equity over time
- Possible income from leasing extra space to other tenants
- A separate asset that may be sold or leased to a buyer when the physician retires
Because women’s health offices often require specialized build-outs, control over the space can be especially valuable.
When Leasing May Make More Sense
Leasing can still be the better choice when:
- The practice is new and wants to preserve cash
- The physicians are uncertain about long-term location plans
- The local market has limited suitable buildings for sale
- Partners have different views on owning real estate together
- A landlord offers favorable improvement allowances and terms
Comparing the total cost of leasing and owning over a realistic time horizon, with help from an accountant, can clarify the decision.
SBA 504 Loans for OB/GYN Office Real Estate
SBA 504 loans are designed for owner-occupied commercial real estate and certain long-lived fixed assets. They typically involve a bank loan combined with a portion financed through a certified development company, along with the borrower’s equity.
For physicians buying or building a medical office, SBA 504 financing may offer long-term, fixed-rate financing on part of the project. Eligibility and terms depend on the business, the borrower, owner-occupancy requirements, program rules and lender review. Every loan is subject to approval.
SBA 7(a) Loans for Real Estate
SBA 7(a) loans can also be used for real estate, and they may be useful when a purchase combines real estate with other needs, such as acquiring a practice and its building at the same time or adding working capital. Program rules, eligibility and lender review apply.
Conventional Real Estate Loans
Conventional real estate loans follow each lender’s own underwriting. They may suit established practices with strong financials and meaningful equity. Terms, collateral requirements and covenants vary, so comparing several options can help.
Owning Through a Separate Entity
Many physicians hold real estate in a separate entity that leases the building to the practice. This structure may help separate real estate from practice operations and can simplify future transitions, such as a partner buyout or sale of the practice.
The right structure depends on tax, liability and partnership considerations, and it should be designed with counsel and an accountant. Lenders will review the structure and may require the operating practice and its owners to support the loan as well.
Buying the Building With the Practice
Some acquisitions include the seller’s building. In those cases, the buyer may finance the practice and real estate together or separately. Buyers should obtain an appraisal, an environmental review where required and a property inspection. Our guide on how to buy an OB/GYN practice covers the broader acquisition process.
What Lenders Review
For OB/GYN office real estate, lenders typically look at:
- The practice’s financial statements and tax returns
- How much of the building the practice will occupy
- Appraisal, property condition and environmental reports
- Purchase contract or construction budget
- The physicians’ credit history, liquidity and existing debt
- How the building fits the practice’s long-term plans
For construction or major renovations, lenders may also review plans, contractor bids and timelines.
Building or Renovating
Ground-up construction or major renovation adds complexity. Projects may involve land acquisition, permits, contractor management and longer timelines. Budgets should include contingency for cost changes. Some financing programs can cover construction and the permanent loan, depending on lender review.
If the project includes new service lines, such as a procedure suite or imaging, our gynecology practice expansion financing page explains how those additions may be financed.
Partners and Shared Ownership
In a group practice, not every physician may want to own the building. Some groups let interested partners invest in the real estate entity while others simply remain tenants through the practice. Clear agreements should address how rent is set, how new partners can buy in, what happens when an owner retires and how decisions about the building are made. Misaligned expectations between real estate owners and non-owners can create friction, so it helps to settle these terms early.
Thinking Ahead to Retirement
Owning the building can add options when a physician plans to retire. The owner may sell the building with the practice, sell it separately or keep it and lease it to the buyer. Each path has tax and practical implications to review well in advance.
Final Thoughts
OB/GYN office real estate can be a valuable long-term asset, but the decision to buy should fit the practice’s finances, growth plans and the physicians’ goals. Comparing SBA 504, SBA 7(a) and conventional options can help you choose a structure that supports both the practice and your future plans. For an overview of other loan types, see our article on OB/GYN practice loans.
US Medical Funding helps women’s health physicians finance the purchase, construction and improvement of their offices. Explore our full range of gynecology practice financing options.
