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EP127 - Strategic Wealth Planning for Physician Property Owners

Today’s podcast episode is my interview on the Wealth Planning for the Modern Physician podcast with David Mandell of the OJM Group. We dive into healthcare real estate assets for physician owners interested in properties for their practice as a financial planning and wealth management tool. 

Schedule a healthcare real estate investment strategy call with Trisha

In this episode, we talk about:

[3:10] What it means to be a Certified Commercial Investment Member

CCIM, a Certified Commercial Investment Member, is an organization that you go through four different classes and then a capstone where you focus just on positioning properties as income generating real estate and how to value them and how to underwrite them. 

It starts with some general discount cash flow analysis, and then it goes through user decision analysis, which is when you can get three properties, but you don’t necessarily want to take the cheapest one because it could be in a really poor area and then it gets into underwriting in a lot more detail. 

People that have this designation have specifically gone through this training, and have a background in how to make sure that a property is properly underwritten and helps on the sell side, and on the buy side, how to analyze that for a client, and then also how to help them decide financially on a piece of real estate along with the qualitative aspects of the property as well in order to either purchase or sell a property that makes sense for them.

[5:04] What it means to be hold a Masters of Corporate Real Estate 

A Masters of Corporate Real Estate takes a look at real estate as a function of a company. For instance, I had a client that had 150+ sites across the country and that has to be aggregated in order for somebody somewhere to be able to make some decisions without it being incredibly painful.

This is taking real estate as a function of a company, financially modeling it, but being able to also have key indicators, saying, what is your annual run rate as the person using the real estate. 

If you own real estate, you need to know what the value of your assets under management is. We as real estate professionals, it’s easy for us to understand how real estate works but if you are selling widgets, your real estate is a function of you being able to sell more widgets, it’s not necessarily a function of the real estate, per se. 

Nobody wants to overpay, but sometimes you need to be in a specific location and that location, when you run the numbers of what it will generate for your business, it makes sense for you to pay the rent that’s in that location so having someone like myself to represent you in that negotiation process. 

[7:40] How Trisha got started in real estate

Trisha started in the in house leasing department for a healthcare developer. She eventually moved into third party brokerage and did a ton of landlord leasing and then from there started doing investments and has continued to do more on the investment side over the years and has discontinued doing landlord leasings. 

All of her experience has helped her really understand each aspect of the process thoroughly so she can really take a deep dive look into each property and optimize it to sell. Trisha has found that a lot of physician owned properties don’t have the proper systems in place and the whole process ends up being quite the headache. She enjoys coming in and helping physicians organize everything and get the value that they deserve from the property. 

[12:02] What motivated Trisha to launch DOCPROPERTIES

Before starting DOCPROPERTIES, Trisha worked at a national firm. At national firms, medical office is lumped into the general office category so it can be a little challenging to find the resources needed for medical office properties so she enjoys being able to have those resources readily available at her company. 

[12:48] Factors to consider when scoping out a building for your medical facility 

One big thing that a lot of physicians do not think about when selecting a property to practice in is parking. In Arizona at least, a lot of the municipalities are 5 per 1000 parking so owners need to know that going in so that the building they choose has enough parking to accommodate medical office space.

In addition to parking, there needs to be the opportunity for tenant improvements that medical office space will need like adding in extra sinks, extra bathrooms, etc. 

[18:43] What a healthcare real estate advisor is and how its beneficial to doctors 

A healthcare real estate advisor really knows the medical office market and is able to advise you on the best steps to take when it comes to buying, selling, and leasing your medical real estate. They help save their clients a lot of time in the negotiation process because they are so familiar with it. 

[21:46] How Trisha can support doctors with their purchases on a national level 

Trisha has an extensive broker network across the country that can assist as needed. If a physician wanted to sell a property in another state, she could assist with a lot of the upfront work but would go through a local broker to handle the final transaction. 

[23:25] The process behind selling a medical practice building 

The first step would be valuating the property for refinance and doing a market analysis before taking it to lenders. Trisha can help with the selling side of things when you are ready. 

[24:46] What to do first when building or purchasing your own medical real estate 

The first thing to do when building or purchasing your own medical real estate is deciding on the budget. Once the budget is decided on, then you can start thinking about the logistics of the build out and this is an area that Trisha can really help you in as she’s very familiar with the different options physicians may need in their space. 

Trisha can also assist with finding architects or collaborating with your architect if you already have one. It is a very collaborative effort where Trisha can look for buildings and send over the plans to the architect to start getting a shortlist of properties that will be the best fit for the client. 

After that, if the client likes all of the properties the same and doesn’t have a preference for which one they end up in, Trisha can negotiate on terms and try to get the client the best deal possible. 

[29:06] How to position a medical office for valuation

Positioning for valuation has a lot to do with the tenants and the site. If the client is the only tenant then they need to get a market lease in place. If they have other tenants, then you need to look and see what is going on there. If they don’t already have market leases, then you can try to work through them if they’re expiring, and renew them, but it’s depending on where everything is currently at because the problem is if they’ve been negotiating below market rents, and then they want to all of a sudden do market rents what’s most likely to happen is they’ll have to clean out the tenants that are in there.

Another important thing is to make sure that that common area is in its best look and feel, maybe add a fresh coat of paint. I don’t know that anyone has carpet anymore, but if they did have carpet, I’d recommend that they remove it. Then landscaping, make sure that the landscaping is taken care of. If the building needs to be painted then touch it up. Make sure that the roof is in good working order by patching it or repairing it. 


[31:13] When you should consider selling your medical building 

If you are looking to sell, right now cap rates are pretty low for medical office and they typically stay pretty low as long as both the lease terms and tenants are strong. Medical office real estate is not recession proof, but it is recession resilient so a lot of capital has migrated over to the medical office sector because it is an essential business. 

Sale leasebacks are another great option for physician owned real estate and that’s because the value of the property is at its highest when you have the longest lease in it so if you’re going to want to sell it, it is important to look and be aware of your retirement age and maybe 10 to 12 years before then maybe think about putting a 10 year lease on your property and then selling it to an investor because that’s where you’re gonna get your highest and best use. 

[36:58] Trisha’s best advice for doctors regarding real estate within their practice 

 With medical office real estate, the value of the real estate is really within the tenants of the space. When you’re negotiating a lease or looking to buy or sell a property, just think about that because you are the value of the property. A medical office building built out in the middle of nowhere is the value of zero because nobody will occupy space there versus a medical property that is built serving a community, or a lot of medical buildings are built with pre leasing so they have to have a certain amount of pre leasing before they’ll actually start going vertical. 

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