time involvement and independently from the performance of your business and/or home equity. Here’s another thought: when you own the commercial property as a part of the practice, debt payments and other expenses associated with owning cannot be made unless they are generating income from your work because everything is directly linked. A common opinion of many business owners is that the focus of their time and energy should be devoted to their professional practice and not have the distractions of being a landlord take away from this. As one doctor said, “The return on an hour spent with my patients is greater, in my prac-tice, than on being a landlord.” And so, for some, the prefer-ence becomes to have a real estate portfolio that is separate from the business operations and to put into place a system for administering that portfolio without a the practitioner’s day-to-day involvement, thus relieving them of the role and challenges of simultaneously being a landlord. POINTS TO CONSIDER In summary, the question we are trying to address does not have one answer that is best for every chiropractor – or, for that matter, for all professionals in general – but, instead, depends on your individual preferences, your income and investment goals, and the type of clinic that you run. To help you decide which option may be worth exploring for your own individual situation, here are a few things to think about: • Do you want an income or assets independent from your practice or operations, and why? (That is, what are the di-versification options and benefits for you?) • What does your clinic’s operating cash flow look like with both options and what are the immediate capital require-ments? (That is, down-payment, improvement costs, etc.) • Can the money you’re using (for down payment, renova-tions, building maintenance, etc.) or time required provide a better return from somewhere else? (That is, what is the opportunity cost?) • Exit strategy. When, or if, you are looking to sell your prac-tice, is it likely that the property will form part of the sale and will it make it easier or more difficult to sell? • How easy is it to sell or lease the commercial property should you sell or wind up your practice? • How much do you want to be involved in the business of being a landlord and do you have the expertise to man-age this? Experienced commercial property owners know that when commercial properties are vacated – that is, if you decide to wind up your practice – they can remain vacant for extended periods as commercial tenants have very particular needs, which can also lead to costly tenant or leasehold improvements. Whether you consider having real estate as a part of your operations or separating your real estate investment portfolio as an option to create or preserve wealth, building equity and creating a long-term passive income is something worth ex-ploring. How you wish to go about it – and I’ve seen success on both fronts – should be based on your defined objectives and priorities. You will discover there are unique strategies that align better for you and options to help you achieve what you want. • www.canadianchiropractor.ca CANADIAN CHIROPRACTOR | DECEMBER 2012 • 43
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