psychotherapy office space

Psychotherapy office space: Rent, lease, or purchase?

Posted in Office Space and Location, Expansion Issues

There are many factors to consider when looking at office space for psychotherapy practice. Is it best to think in terms of renting, leasing, or purchasing psychotherapy office space? The answer, of course, is “it depends.” Let’s look at how to make that decision.

My story with psychotherapy office space

When I first started, I worked for others. The owners I worked for had taken the lease or owned the building. I did not give much thought to how that space became available for my use. I had plenty on my plate, trying to become a therapist. But as I gained skill and was ready to think about a more independent practice, I started noticing spaces that I might rent.

But I wasn’t ready yet. My next move was to rent time in an office that had been leased by another therapist. We were sharing the same office and waiting room. Next, I rented one office is a suite of offices, again leased and owned by others.

Eventually, I did find my own space. It took some self-education to figure out how things worked. I remember walking around the town I was working in and knocking on doors that seemed like a building that might have appropriate space. Not very efficient, but I did learn a lot from those I talked to.

I found a building owner who was willing to lease space to me. She even did a little build-out to fit my needs. I was leasing my first space. I went on to lease many other spaces and eventually to own four business condos in a commercial building. Here are some of the lessons I have learned.

First consideration: What is available?

Each community has its real estate options, and none are the same. So what works in one community may not in the next. My practice grew to where we had offices in three communities. Every city was different. Our options were different in each one.

That said, in most communities, you will have three options: rent or sublease, lease, or purchase.

Renting or subleasing

Renting or subleasing usually means that someone has set up a psychotherapy office. So you then are renting some hours in an office or the whole office. Sometimes these arrangements do not even have a written contract, though it is better if they do.

Renting or subleasing typically means setting up an agreement with the leaseholder or owner of the therapy suite. The agreement can be based on an hourly fee, a block of hours per week, or even a set monthly amount for the use of the office space. In my experience, these arrangements vary a lot. The goal here is being as clear as possible about all the details around the use of the space.

Leasing space

Leasing space usually means working out an agreement with the owner/landlord of a building. Often the landlord is looking for a commitment of two to five years, sometimes with an option for renewal at a set price. The contract you are signing stays in effect, no matter the changes in your practice. You are committing to staying in that space for as long as the lease/contract is in force.

Purchasing space

Purchasing is like the purchase of any real estate except that the building must be zoned for commercial use. This purchase will require a downpayment, and a mortgage secured from a bank. In most ways, it is like the purchase of a residence except that banks use different criteria for determining eligibility. Banks generally like it if you are going to have your business in the building you are purchasing. They view owner occupancy as a less risky transaction.

Terms of rent, lease, or purchase

Firstly, in all these arrangements, clarity is the goal. I can remember some tense times over the confusion of identities that working in the same space can have. For example, are you going to share referrals or referral sources? Talk about it before making assumptions.

Secondly, deciding whether to rent, lease, or purchase psychotherapy office space is mostly about finding terms that work for your short to mid-range goals. So if it works for you, then it is a good deal.

Thirdly, the length of time you plan on staying in that office space will determine many of the terms of your agreement. As I said, landlords like a two to five-year commitment. But if that is not what you can sign up for, then work on another arrangement. It may cost you a bit more but give you the flexibility you need.

Your finances

Moving into a new space is not cheap. First, there are the moving expenses. Then we may have build-out costs. These can add up to tens of thousands of dollars. And then we may have the costs of new furnishings and equipment. And of course, if you are purchasing, that includes the downpayment and closing costs.

The good news is that the right space can set you up for increased income. This is especially true if the move increases your capacity to hire others and increase their productivity.

Potential for expansion

Another critical factor that may influence your selection of a psychotherapy office space is its potential for development. If you are expecting to expand quickly, talk to the landlord/owner about it. S/he can be a resource in planning the next move. And sometimes they are willing to give rent credit when you first move into a new suite. I have heard of 6-months free rent, though 2-months rent-free is more common.

Moving into a larger building that has many different sizes of suites can help when it is time to move. Moving within a building is more desirable than moving somewhere else. A building with options is a resource in itself. I have even known practices that decided to sell a suite they owned to move into a larger space. No one wants to limit growth because of space issues. See more on this topic in Grow, hire, run out of space, repeat . . . forever.

Your confidence in the neighborhood

The last factor to consider is the neighborhood your office will reside in. The more confident you are that you will be in that neighborhood, the deeper you can dig your roots. That will affect whether you decide to rent, lease, or purchase your psychotherapy office space.

Putting it together

So as you are considering your next space, think about these factors:

  • What psychotherapy office space is available in your area
  • What finances will be available for this move?
  • Are the terms right for you?
  • Is there a potential for expansion in the building?
  • Is this the neighborhood you want to be in?

When it all matches up, it is time to take the plunge.

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