Building the Practice of Your Dreams: Selecting the Right Space and Paying For It

Posted by: Doc Warren on July 12, 2019 12:34 pm

Selecting space is one of the most important aspects of a practice, whether it is your first location, an additional location or if you are considering relocating an existing practice. Just as in politics and religion, there are many philosophies and schools of thought on this. This article seeks to explore some, but definitely not all the options and considerations. It should help to provide a good framework to build upon, however, it cannot replace what you could expect from hiring a business professional or consultant that can help you develop a comprehensive business plan.

It’s time to find a location and if you are like most folks, you may be feeling just a bit overwhelmed. Should you buy, should you rent, or should you do a long-term lease? You might ask such questions as, how close do I want the office to be to my house? Could my house be converted into two spaces, one to live in and one to use as my office? Would I be allowed to convert my house by law or would I have issued with the local authorities? How big a space do I need? What is my plan for future expansion? How do I come up with a budget and stick to it? How much remodeling will be needed and will they allow me to do it or do I have to hire trades? What’s my ability handy wise? The lists seems endless and your head begins to spin like a dreidel.

Rent\Lease
While I personally am not big on renting or leasing, I have done it while in the process of buying a property or two. There are many advantages and disadvantages to not owning. I’ll start with the common disadvantages of renting/leasing so we can end on a high note:

  • Lack of control over aesthetics: You don’t own it so you are limited in what you can do to change the office. Depending on the agreement, you may or may not be able to change paint colours, may be limited in how you can decorate and what you can hang on the walls (some owners forbid nails or other mechanical hangers on their walls due to the potential need to fill in the holes and make other repairs once you leave). You may have no control over updating dated flooring, wall colors or other aspects of the office. You cannot make structural changes, change door sizes or door locations. Also, depending on when it was last updated, this property may not comply with accessibility standards. Depending on the owner, they may or may not voluntarily make the upgrades. Some property owners may refuse the upgrades which puts the renter in a tough space, others may refuse to pay for the upgrades but allow the renter to do so. It’s best to explore this before signing contracts. It should be noted that is you purchase the property, it all falls on you to make the improvements.
  • You will not build equity: When you own a property you will typically build equity as in most cases real property such as an office building, home, land etc. will increase in value as time passes. Upgrades, additions and other improvements made to the property typically will increase the appeal and resale price of a property. If you do not own the property though, every cent you pay to the owner is traded for the time you used it, it will not ever have a chance to earn you anything in the future.
  • No control over neighbors: This is most crucial in a larger building with multiple office suites for rent. As a tenant, you have little to no say in who your neighbors are. Over the years I have consulted with folks who have found that competitors rented space in their same building. Other times they found that an influx of new neighbors changed the feel of the building and became a detraction for them. One example was when a wellness and recovery program found themselves sharing space with a bar and microbrewery. While there is nothing wrong with bars or breweries, it proved to be a huge trigger for clients who were trying to stay sober. Had they owned the building, they could have done more to make sure that the renters all complimented one another.
  • Your contract may not be renewed: Many folks have found themselves having to relocate from a spot that they held for years and had grown to love due to changes in the ownership of the building, or changes in the use of the building. Once your agreement expires, neither you nor the owner is compelled to sign a new one. Should the owner have a new plan for the space, you may find yourself looking for a new location at the most inconvenient time.

Advantages of Renting/Leasing:

  • Repairs: depending on your contract you may find that you are not responsible for any repairs to the office. This reduces the need for maintenance staff and repairs (though these are often factored in the rental fees).
  • Mobility: As you do not own the property, you are free to leave when you want, though if you are still in an active contract you may receive some financial penalties.  Whereas if you owned the property, you would need to pay and maintain it until you found a new buyer.
  • Remodeling/renovations: Depending on your contract you may find an owner that is willing to build or remodel the office to your needs for no additional cost (though expect this to be a factor when they consider the monthly rental fee). Should this be the case, expect them to want to have you sign a lengthy agreement than 1 year. There may also be a penalty should you try to leave within the life of the agreement.
  • Size of practice: Many times when starting out or adding a location, you will need a minimal space, far less than an entire building. Renting may allow you to rent as little as a few hundred square feet of space and also allow you to expand in the future. Purchasing a property allows you to own it all or nothing. By renting just what you need as you need it, it can be far cheaper than having to buy much more than you will use.

Disadvantages of Buying:

  • Cost: The initial costs of purchasing a property can be daunting to say the least. Whereas renting may cost you a few thousand per month depending on size, location, etc., purchasing a property unless you are able to pay cash or have a super high down payment, will often cost you thousands a month for decades. This may be more than you can afford at the moment.
  • Repairs/ maintenance/ remodeling: As an owner, you will be responsible for all costs associated with the upkeep and improvements of a property. This may require hiring additional staffing and or having various trades on your speed dial.
  • Lack of mobility: Should you decide to relocate your office, you cannot simply move on once a contract has been completed as you could with a rental. Instead, you will offset need to either sell the property or find someone to lease it from you to help offset the expenses of keeping that property and opening elsewhere.
  • Availability: Depending on the market, it may be difficult to find your ideal property in the area that you wish to be located in. In some markets there is a very low inventory of specialty properties for sale. In our case, it took 4 years for us to find the right property, in the right area for a price we were willing and able to pay. This can sometimes be an issue when renting as well.

Advantages of Buying:

  • Building equity: Equity may help fund other projects or give leverage to better interest rates on a loan should you need funding. Some see equity as a nest egg in case an emergency should arise.
  • Build and remodel to suit your changing needs: As the owner of a building you have the ability to change it to suit your needs so long as you can afford to do so and you stay within government regulations. This can help you to totally transform a location as your practice develops.
  • Control your immediate neighbors: Should you own a larger building than you need and decide to rent out other areas, you can have control over who moves in so that they can complement, not compete with one another. This is not usually possible in a rental situation.

How close do I want the office to be to my house?
One of the most common questions that I am asked is how close is too close to have an office? Again, there is no right answer here. Each has its own pros and cons. Close to home offices are easier to get to in bad weather, offer short commutes and familiarity for sure. They can allow you to tap into a community that you already know, which may help with initial referrals but they also can cost you some much needed privacy and make it harder to keep firmer boundaries. I worked and lived in the same town for years and though overall I loved it, I have had some strange encounters such as when a few clients seemed to know my background better than I did. A few knew exes of mine and attempted to discuss the relationship before I reminded them that this was their session, not mine. I’ve also been “spotted” by clients when I was dressed in my worst outfit and trying to find a key part at the local hardware. Others new of my background and were inspired by it. You really need to explore this fully and decide what works best for you. In the end, I only moved my office because I found my dream location and it happened to be in the next town (about 4 miles from the office I had been using).

Is virtual counseling an option for you?
With the ever changing climate and the advancement of technology, more and more clinicians are considering tele-health and virtual counseling as their mainstay in practice. Though regulations vary depending on the country, state, province etc. that you are located, this area promises to be lucrative to those that decide to take it on. It requires that you have the specialized training in the area (many of these trainings can be had via online courses), equipment with the proper privacy software and a quiet room in which to conduct your sessions. I’ve known some clinicians that did this in a spare room and at least one that did it in their bed room; they put a screen behind them to hide the bed and other “private” items. However, virtual counseling is not for everyone. More and more folks are indeed giving it a go, so it is worth exploring. Here in the states, payment for these types of sessions is an issue with only certain insurance companies being willing to cover such care. Be sure to check in your area.

Could my house be converted into two spaces, one to live in and one to use as my office? Would I be allowed to convert my house by law or would I have issued with the local authorities?
Many people are remodeling their existing homes in order to build an office on site. This offers a very low overhead as it typically results in possibly a bit more insurance and an increase in utilities but little else other than the cost of the remodel. It’s important to work with local government agencies however to make sure that this type of use is allowed in your neighborhood. If it is, a separate entrance, separate bathroom and an office area that is separate from your living space is recommended.  Speaking with a tax specialist may be key here as well as there may be tax considerations that may make it more or less enticing. If you hold a mortgage, be sure to make sure that there are no provisions prohibiting the use of the property on a commercial basis as well. It is best to head into this with eyes fully open. Lastly, be sure to be considerate of your neighbors. Be sure that target population, hours of operation etc. will go well within the exiting neighborhood. For instance, working with violent populations such as sex offenders, those with histories of violent crimes etc. would not set well with most suburban neighborhoods. Should this be your population, much may need to be done in terms of educating and working with the neighborhood prior to opening so that you may avoid vocal and legal opposition. Being open and honest with the neighbors is typically the best policy. Please note however that this does not mean that you would ever disclose information on any particular client, just that if your program is to specialize with the above mentioned clientele, it is best to make sure the local laws and those around you are aware so you can calm things prior to opening. For general practices, this is not needed but it is wise to always properly screen clients for proper placement.

How big a space do I need? What is my plan for future expansion?
These questions will help steer the search for sure. How big do you want your office to get? Do you want to have many clinicians or just yourself? For me, I would like to see that every clinician get an office that is at least 12ft by 12ft. There needs to be a bathroom, waiting area and reception/ medical records area (even if you are all electronic, there will be a need for certain forms and other resources.

How do I come up with a budget and stick to it?
Most of us have not won the mega bucks so we need to make sure that we keep our costs affordable. If you are not great with budgets it may make sense to hire a consultant that can assist you with making a basic budget and teach you how to stick to it. Many places that have failed have done so in large part by spending beyond their means. Be realistic with cost projections as well as with income projections. Personally speaking, I try to be ultra conservative when planning on income to fund a project so that I do not find myself overextended. You can always increase your budget later should you have the ready cash. When doing an expansion, I never count on an increase in income as a result of the new space or programming and only spend what I can afford at that time. Many will disagree with this premise of course and may recommend a more aggressive approach. Their way may indeed bring faster growth but it also brings more risk than I personally care to take on. I’d rather grow slowly and surely than risk overextending and closing down after financial failure.

How much remodeling will be needed, and will they allow me to do it or do I have to hire trades? What’s my ability handy wise?
No matter if you rent, lease, own or borrow space, it is helpful to have a solid idea as to what your abilities are remodeling wise. Some projects are expensive to hire out but require little in the way of special tools or advanced skills. Taking these projects on may help you save thousands of dollars. It is imperative however to check with local codes to make sure that you are allowed to do this without a license. Also check with the property owner and get all the permission required. In the case of my program since we owned the buildings and grounds, we were allowed to build a bathroom with a composting toilet system but were not allowed to install our own septic system. We were allowed to do much of the electrical, structural, sheetrock, windows etc. based on our ability. Local codes will vary however.

Case study:
For the first office of the charity I founded, we looked for office space all around our target town. We found that the quality and the price of each rented space varied greatly, with some of the cheaper ones appearing to have better quality. Each office space we looked at however left us saying that we wish it had the feel of the neighborhood where we lived. Eventually, we decided to look into the local laws and found that we could indeed have an office out of our home. Our home offered two floors, each with a bathroom. Instead of paying up to $15 per square foot in rent for 1200 square feet, we elected to remodel our existing space. As we owned the building, we were able to move walls, enlarge the bathroom, paint, and do flooring etc. by ourselves. This enabled us to keep costs low while still being in our target neighborhood. The fact that we still had our own private living area was a real plus.

We kept that space for years, expanding it once to add another office (we remodeled an attached garage into an office) and changing the interior from time to time. The space served us well until finally it became obvious that we needed far more space than the building could offer us. We started looking for a space to purchase as we had grown accustom to having the final say on what we did with our space. After much search and a false start or two (somethings look good on paper or in person but not vice versa) we found what we felt was a diamond in the rough just a few miles up the road from us.

We were able to negotiate a better than prime interest mortgage with only 10% down and to purchase the property well below its estimated value. Thankfully, at closing we had 40-50% equity in the property which gave us a safety net should we ever have to take out a loan for repairs or to help the charity get over a trying time. The building and grounds were rough to say the least and required a ton of work before we could move into it. We started by building a working bathroom, using a composting system, as we did not have access to city sewers and the property lacked a septic system. We then framed the building out for offices and a waiting area and installed basic heating. We opened on a limited basis, a day or two per week at first and made a slow transition with our existing clients. Most made the move without issue though a few were upset with the additional 4 mile commute and were referred elsewhere.

Over time we made more and more improvements to the building and grounds. We added two large greenhouses, added hiking trails, gardens, “pocket areas” that became attractions in their own right, including an interactive animal sanctuary area, meditation spaces, benches, orchard areas and other items of interest. In time the original building which we still owned, became the administrative building and also served as a location that had back up offices should there ever be a catastrophic event the necessitated the short term closure of the main location. The building is currently about 7800 square feet over 3 floors. It contains many offices, a few large community rooms, shop space for occupational training, art based therapy space and several clinical offices. We have elected not to subdivide and to enjoy all the space for ourselves. We initially bought about 24 acres but recently purchased the neighboring 25 acres, this combined with right of way land gives us 50 acres for programming.

Due to careful financial management, we have been able to renovate the property in stages without incurring mountains of additional debt beyond that of the mortgage. The mortgage we took out only covered the purchase price. We elected to pay for the remodeling as we went along in order to keep our monthly payments. Low. As of today, our only outstanding non-mortgage debt is what is left of the HVAC system bill. That amounts to about fifteen thousand US.

In consulting with other programs in the area, we have found that our combined mortgage payments (the main property and the new acreage) are typically far less than some folks are paying for rent on offices that are only a fraction the size of ours and offer little to no outside space.  While our model would not work for everyone, it has enabled us to grow year to year since we were founded. By keeping overhead low but program quality high, we have thrived at a time when many other programs have closed. We have also been able to do so with no formal advertising other than a website and signs for the office.

A dream practice is possible if you are willing and able to put in the effort. I’m rooting for ya.

Be safe, do good

-Doc Warren
“Doc Warren” Corson III is a counselor, educator, writer and the founder, developer, clinical & executive director of Community Counseling of Central CT Inc. (www.docwarren.org) and Pillwillop Therapeutic Farm (www.pillwillop.org). He is internationally certified as a Counsellor and Counsellor Supervisor in the USA and Canada (C.C.C., C.C.C.-S, NCC, ACS). He can be contacted at [email protected]




*The views expressed by our authors are personal opinions and do not necessarily reflect the views of the CCPA

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