Medical Office Investment Group
Rental Property Investor · Wichita, KS · Member since 2019 · 12 posts · 6 votes
Medical Office Investment Group
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesQuote from @Solace Medina:
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
1. Do I have the expertise necessary to analyze, negotiate, and manage this investment?
2. Do I have the experience necessary to do the same?
3. Do I have the capital necessary to buy the property without ending up over leveraged and with having sufficient emergency capital?
4. Do I have the temperament to deal with the risk, tenants, and uncertainty of direct investment in real property?
5. Do I have the financial cushion to deal with a large loss to my capital?
6. Do I have the time to devote to managing this investment?
7. If my spouse/significant other turns against me as a result of the consequences of making this investment am I willing to accept this consequence?
14 Replies
- 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
- Member since 2024 · 69 posts · 25 votes1y
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
Hi Don,
Are you saying that smaller medical offices are gone due to these medical groups being absorbed by larger practices?
I invest (dabble) in medical offices so would really like to hear and understand your thoughts on this.
As an example I have a tenant that is a dermatology group. The business was owned by a sole proprietor, but the doctor sold it to a PE firm. He know works the derm practice still and I assume he gets a cut of the action from the PE firm. He has a couple of locations. I can't imagine this type of medical would be consolidated.
Would love to hear your thoughts.
TIA! - 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesI’m speaking of a (very large) TREND, not an absolute. There will still be the small locations for small practices, but these are now far fewer and will be almost non existent in the future. As an example, I owned a small medical building in Dallas that had two solo practitioners, a podiatrist and a family practice. Both joined far larger practices and their leases expired moved to a large medical office building newly built nearby. I sold the building to a daycare operator.
Quote from @Bob Dole:
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
Hi Don,
Are you saying that smaller medical offices are gone due to these medical groups being absorbed by larger practices?
I invest (dabble) in medical offices so would really like to hear and understand your thoughts on this.
As an example I have a tenant that is a dermatology group. The business was owned by a sole proprietor, but the doctor sold it to a PE firm. He know works the derm practice still and I assume he gets a cut of the action from the PE firm. He has a couple of locations. I can't imagine this type of medical would be consolidated.
Would love to hear your thoughts.
TIA! - Rental Property Investor · Wichita, KS · Member since 2019 · 12 posts · 6 votes1y
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
- Rental Property Investor · Wichita, KS · Member since 2019 · 12 posts · 6 votes1y
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
- 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesSUCCESSFUL entrepreneurial real estate activity will almost always have a greater ROI than a passive interest in a large diversified portfolio of class A properties. Here are the most important questions the investor must ask themselves BEFORE making a determination as to whether or not a direct investments in any real estate is a viable option for them
Quote from @Solace Medina:
Quote from @Don Konipol:
I've owned a few medical office properties in the past. Minimum total price for a smaller, yet still "efficient" property would be in the $1,500,000 + range in the less expensive states. Financing of up to 50% at 2 or 3 % over "base rate" can be had. Any LTV over that would require hard money rates, which would make cash flow negative. So, if you are able to find a cash flowing property in a low cost area you would realistically need $750,000 plus emergency capital of your own money to do a deal that has any chance of success.
Most smaller medical office buildings were occupied by solo practitioners or small partnerships. In the last 5 years those are gone, ALL medical practices are now part of major group practices. As leases expire the major practice administrators either consolidate and relocate practices into large medical campuses, or negotiate leases with retail strip centers that have empty space and are willing to sign a long term lease at way below market rent to attract an “anchor”.
I no longer invest directly in medical real estate, I invest in medical office REITs.
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
The large cost to get into medical offices is very intimidating. What makes it worth it is, I do think that medical offices can be one of the safest investments. I have seen the trend of smaller practitioners moving to large medical buildings. I have also seen retail strip malls leasing to urgent cares and other medical tenants more often now.
How has medical office REITs been performing for you? What type of return are you getting? How long does your investment stay in the REIT?
1. Do I have the expertise necessary to analyze, negotiate, and manage this investment?
2. Do I have the experience necessary to do the same?
3. Do I have the capital necessary to buy the property without ending up over leveraged and with having sufficient emergency capital?
4. Do I have the temperament to deal with the risk, tenants, and uncertainty of direct investment in real property?
5. Do I have the financial cushion to deal with a large loss to my capital?
6. Do I have the time to devote to managing this investment?
7. If my spouse/significant other turns against me as a result of the consequences of making this investment am I willing to accept this consequence?
- Member since 2024 · 69 posts · 25 votes1y
Quote from @Solace Medina:
Does a medical office investment mastermind/investment group exist? I want to learn how to analyze, find, acquire, and lease medical offices from investors who are in this space. I want to do this as a single investor (or with a partner) but not through joining a syndication. I'm located in Wichita, KS but location doesn't matter if there is an online group!
Alternatively, if you are an investor who owns medical offices, I'd love to chat with you.
I've invested in a couple of commercial medical properties. This was by design as I feel medical is more ecommerce proof. The sunk cost is somewhat substantial, so most of these medical practices won't leave unless business is bad, or rents are out of control. I purposely avoided retail and entertainment (restaurants) types of properties as I feel business can boom for 10+ years and all of a sudden it doesn't. For medical, depending on what it is, you're going to have to see a doctor.
One other thing I've seen is that the doctor(s) generally owned the property at some point. At some point they may wish to sell their practice. The cost of the practice and property would make the sell price quite prohibitive. So they sell the property first, rent back, and sell the practice a couple of years later.- Rental Property Investor · Wichita, KS · Member since 2019 · 12 posts · 6 votes1y
Quote from @Bob Dole:
Quote from @Solace Medina:
Does a medical office investment mastermind/investment group exist? I want to learn how to analyze, find, acquire, and lease medical offices from investors who are in this space. I want to do this as a single investor (or with a partner) but not through joining a syndication. I'm located in Wichita, KS but location doesn't matter if there is an online group!
Alternatively, if you are an investor who owns medical offices, I'd love to chat with you.
I've invested in a couple of commercial medical properties. This was by design as I feel medical is more ecommerce proof. The sunk cost is somewhat substantial, so most of these medical practices won't leave unless business is bad, or rents are out of control. I purposely avoided retail and entertainment (restaurants) types of properties as I feel business can boom for 10+ years and all of a sudden it doesn't. For medical, depending on what it is, you're going to have to see a doctor.
One other thing I've seen is that the doctor(s) generally owned the property at some point. At some point they may wish to sell their practice. The cost of the practice and property would make the sell price quite prohibitive. So they sell the property first, rent back, and sell the practice a couple of years later.This is exactly what is drawing me to medical offices. The stability during economic downturns, the in person necessity, sticky tenants, strong tenant income, etc.
Did you invest in these medical properties by yourself or with a group or partner? How did they perform? I'm trying to assess if and how I can get into this investment class.
- Member since 2024 · 69 posts · 25 votes1y
Quote from @Solace Medina:
Quote from @Bob Dole:
Quote from @Solace Medina:
Does a medical office investment mastermind/investment group exist? I want to learn how to analyze, find, acquire, and lease medical offices from investors who are in this space. I want to do this as a single investor (or with a partner) but not through joining a syndication. I'm located in Wichita, KS but location doesn't matter if there is an online group!
Alternatively, if you are an investor who owns medical offices, I'd love to chat with you.
I've invested in a couple of commercial medical properties. This was by design as I feel medical is more ecommerce proof. The sunk cost is somewhat substantial, so most of these medical practices won't leave unless business is bad, or rents are out of control. I purposely avoided retail and entertainment (restaurants) types of properties as I feel business can boom for 10+ years and all of a sudden it doesn't. For medical, depending on what it is, you're going to have to see a doctor.
One other thing I've seen is that the doctor(s) generally owned the property at some point. At some point they may wish to sell their practice. The cost of the practice and property would make the sell price quite prohibitive. So they sell the property first, rent back, and sell the practice a couple of years later.This is exactly what is drawing me to medical offices. The stability during economic downturns, the in person necessity, sticky tenants, strong tenant income, etc.
Did you invest in these medical properties by yourself or with a group or partner? How did they perform? I'm trying to assess if and how I can get into this investment class.
We closed on our first property probably ~2 months before covid and lockdowns happened! It was quite interesting as our bank (major national bank) started calling me asking if my tenant was okay and if I needed any relief from the mortgage payments. The bank called me 2-3 times about the property just to double check.
The tenant was still operating. But instead of patients in the waiting room, they had patients waiting in their cars. And only essential visits were allowed. This is a surgery center, so some of these issues could not wait. Were day as busy as previous? No, but they were essential and still busy. This was my thesis for medical.
Invested with a partner, my spouse. So essentially, I'm the lone investor as my spouse doesn't care or manage any of this. I think having partners is challenging. Are people on the same page? What's the goal? Buy and flip? Income stream? What if someone wants to do a cashout refi? What if someone wants to sell?
I originally had conversations with a couple of potential partners. Everyone has an opinion and nothing would get done. I wasn't sure if this was a venture we'd want to do on our own, especially for the first time. I'm 100% glad we did it on our own. No 2nd guessing (nothing wrong with 2nd guessing when it's productive -- but it's a clown show a lot of times.) I have the ability to make unilateral decisions after a quick conversation with my spouse.
I guess it depends on your situation and who your partners are.
BTW, I tried to bring in a family member for prop #2. Made no traction and went on our own again. I'm 101% sure I'll get the, "Why didn't you tell me?" spiel later on about this. I'll be in ignore mode.
For us, it's straightforward. We wanted a strong income stream. We have no medium or long term plans to sell and buy more. MAYBE, I may do a cashout refi in the future and leverage the equity for another property. TBD.
In terms of performance, I'm happy. Cash on cash has been great. If I were to price out the property just based on cap rates, we're "up" ~23% in equity in about 6 years. This has made me rethink about a potential cashout refi in the future. Let's put it this way, I wish we bought a couple more back then. Great interest rates and great cap rates! Now the math is a bit fuzzier because of borrowing costs.
- 1yMichael K GallagherBusiness MemberReal Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
@Solace Medina med office is a great asset, there is likely a local commercial investor/broker meetup in your market that is likely a good place to start. if you can find a local operator or broker that is in the space they likely have connections in other markets as well.
I've searched for a few deals in that space the majority of what we do is more retail medical, regardless, when appropriate I'd be very interest to learn more about the project and understand if our data/site selection analytics can be of assistance. we have some pretty fascinating tools to aid in your search.
- Rental Property Investor · Wichita, KS · Member since 2019 · 12 posts · 6 votes1y
Quote from @Michael K Gallagher:
@Solace Medina med office is a great asset, there is likely a local commercial investor/broker meetup in your market that is likely a good place to start. if you can find a local operator or broker that is in the space they likely have connections in other markets as well.
I've searched for a few deals in that space the majority of what we do is more retail medical, regardless, when appropriate I'd be very interest to learn more about the project and understand if our data/site selection analytics can be of assistance. we have some pretty fascinating tools to aid in your search.
What type of medical practices are you seeing that lease retail spaces? Are these new builds or how are the retail spaces suited for medical tenants? Who bears the cost to convert a retail space for medical use?
- 1yMichael K GallagherBusiness MemberReal Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
@Solace Medina Retail is generally what most urgent care users, or some behavioral health, and chiropractor type uses will go for. Urgent care is probably the highest build out cost of those. and we do everything from converting to ground up development. and the cost really depends on the deal and the clients goals. generally newer built buildings will have TI budgeted for buildout, but some general retail spaces may offer a reduced rental rate to deliver the space as is. Its very deal dependent. But in general its probably $500K min to buildout a 3000 SF UC from what I've seen and that can quickly turn into $800K depending on market.
- 1yRonald RohdePro MemberAttorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
I doubt there's something that niche. Just learn how to underwrite retail if you go the urgent care/chiro route or underwrite single story office for multi tenant.
If single tenant freestanding, thats even easier.
- 1yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
OP. It would probably be more beneficial for you, to identify what level of investment your looking at. $100k, $500k, $1mm of your own money. Then how will you finance it, say 25% down, then the deal would be 4x the above figures. Example $100k down at 25% then a $400k deal.
As an example, we are small town USA. 5,000 population with 5,000 within 2 miles. Two dentist offices. One left. You could have bought his old office for say $300,000; found a New dentist coming out of school, rehabbed to their design, say another $200,000. Signed a 5 year lease with the new dentist, with a buyout clause. Appointments are 3 months out with the only dentist office.
The issue/value with Commercial is not the property itself but the tenant.
Identify your financial parameters and you will get more actionable suggestions.
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