"I heard that Indiana sucks."
"I heard the Phoenix is overcrowded with dentists."
"I heard that you can't swing a dead cat in Salt Lake City without hitting a dermatologist."
No kidding. I have heard it all and much more besides. And what is most interesting is that none of these statements is necessarily wrong. The problem is, they are irrelevant.
A practice area as small as three Zip Codes will define a signficant number of practice types. These include dentists, chiropractors, and veterinarians along with many others. You just don't need to look to the entire metropolitan area to determine the viability of a site. Rather, it is a unit of geography much smaller than this that will define the viability of a site.
So, does Indiana suck?
It is hard to deny that the statistics for the state overall are challenging. Even if we took a fairly middle-sized city like Gary, we could say, it is not positive. But does that mean that no new practice can or should open in Gary?
Of course not!
As we consider the work of a major downtown developer (New Gary Development Group), it seems that someone finally figured out that Gary is an easy drive and train-ride from Chicago. They are taking the "rust belt" image and making Gary a little mroe "people friendly." More suburban developments are going in on reclaimed farm land on the south side of town. This is useful when you consider that the Median Price for a home in Chicago is $261,000 but is only $124,600 in Gary.
Can we recommend practices in ANY part of Gary will be a good idea? Nope. But we can say confidently that even a site that has had such a poor image and bad reputation can hold promise if we look at the Micro versus Marco Economics (and Demographics) of a community.
In conclusion, be creative in your location selections and you will be well-served. There are some gold nuggets in MANY markets others have considered dead, dead, dead.
Wednesday, May 7, 2008
Building Purchase Conundrum
During the course of our consultations regarding properties, we get the question, " Would it better for me to purchase the building (or land) or merely lease?"
It is a difficult question to answer ONLY on the basis of demographics and market trends. The Client's economic situation, credit, and myriad other factors have to be considered FIRST. But with that taken into account and all other factors being equal, we say that the time to consider purchase of real estate (either an existing building or land for construction) is looking good.
Here is our reasoning based upon the numbes we see coming through:
1. Real estate (both commercial and residential) is at a low-point right now. Obviously, when the market is down, there is money to be made by those who have income and credit.
2. The cost of borrowing money is going down. Recent interest rate cuts are not the sole indicator of the price of money, however. Lenders WANT to lend as the way for them to shore-up their portfolios (some of which are looking less than stellar), to keep relevant in the marketplace, and to continue cash flow. True, State and Federal regulators are trying to fix what they had caused earlier by making loan qualifations more restrictive. But we believe this is only giving better leverage to those who CAN borrow.
3. If well selected, real estate is the safest investment in the world IF IT IS AN INCOME PRODUCING PROPERTY. Now, here is where the rubber meets the road: No favorable market can overcome "stupid." You have to do your homework (and consider purchasing a demographic report to help) to determine the best sites.
So, given the current market and all other factors being equal, we believe that an investment in real estate to support your practice could put your well beyond your financial goals in a short time, keep your overhead low (or controllable), and vastly benefit your retirment using a tried-and-true method of investing for doctors.
It is a difficult question to answer ONLY on the basis of demographics and market trends. The Client's economic situation, credit, and myriad other factors have to be considered FIRST. But with that taken into account and all other factors being equal, we say that the time to consider purchase of real estate (either an existing building or land for construction) is looking good.
Here is our reasoning based upon the numbes we see coming through:
1. Real estate (both commercial and residential) is at a low-point right now. Obviously, when the market is down, there is money to be made by those who have income and credit.
2. The cost of borrowing money is going down. Recent interest rate cuts are not the sole indicator of the price of money, however. Lenders WANT to lend as the way for them to shore-up their portfolios (some of which are looking less than stellar), to keep relevant in the marketplace, and to continue cash flow. True, State and Federal regulators are trying to fix what they had caused earlier by making loan qualifations more restrictive. But we believe this is only giving better leverage to those who CAN borrow.
3. If well selected, real estate is the safest investment in the world IF IT IS AN INCOME PRODUCING PROPERTY. Now, here is where the rubber meets the road: No favorable market can overcome "stupid." You have to do your homework (and consider purchasing a demographic report to help) to determine the best sites.
So, given the current market and all other factors being equal, we believe that an investment in real estate to support your practice could put your well beyond your financial goals in a short time, keep your overhead low (or controllable), and vastly benefit your retirment using a tried-and-true method of investing for doctors.
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