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Jim Grazer
Sep 21, 2017 - 12:26AM
Financing a land purchase and office build

I am a couple years into practice. It is becoming apparent that further growth of my practice will require my own in-office operating rooms. I am planning to purchase land (approx 750K) and then build on that. Any advice on how to take the least tax hit in this sort of transaction? I could pay for a chunk of it with personal funds. I could pay for a big part of it out of my corporate account. I could borrow the entirety from my wealthy sister. Should I finance as much as I can? And should I buy it as a separate LLC and then have my current LLC pay rent to the new one?

Zip Code: 32504

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Andrew Schwartz
Sep 24, 2017 - 8:24PM
Re: Financing a land purchase and office build

Hi. Great question.

For starters, you probably want to own the real estate in a separate entity from your practice. And LLCs seem to be the most popular entity to own commercial real estate these days. You want separate LLCs to protect the assets of each entity against liabilities that arise from either your practice or operating the commercial real estate.

For financing, I tend to recommend that people borrow what they can at the start of the project. That tends to be the easiest time to get access to financing. Some of the larger banks have healthcare specific lending groups - including Bank of America, Wells Fargo, and PNC Bank. Maybe try to see if you can go online and find the contact info for these groups. It will work better to contact the healthcare lending groups directly than walking into a branch and ask to talk to a commercial lender.

Once the project is done, you can see how much money you have in your practice bank accounts or see how much your wealthy sister will give to you. You can use those funds to pay back the outstanding debt before the loan is closed.

Lastly, a great way to save taxes when you build out commercial real estate is to complete a cost segregation study. That helps you depreciation a portion of the cost of building out your space quicker than 39 years. MS Consultants is a group that has helped out some of my firm's clients - www.msconsultants.com.

Definitely run this info by your CPA and attorney. Your team should be helping you to come up with the most prudent strategy.

Zip Code: 01801

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