Deal with unequal office ownership

Ensuring Fair Market Value in Medical Office Rentals: The Role of Independent Appraisers

Take calculated and specific steps to involve third parties in setting fair market value. No matter how healthy your interpartner relationships are, unexpected situations or changes of heart can crop up later. Unfortunately, determining fair rental value for a single-use medical office is far from an exact science. Even some professional appraisers give you little more than educated guesses. Still, hiring an independent expert is the best approach.

If you don’t currently work with a real estate broker or consultant, ask colleagues for a few referrals. Going with a “buddy,” especially a friend of the building owner(s)—even though you emphasize fairness—might pose a problem. Obtain at least one third-party appraiser who has no history with either party.

As an alternative, have the real estate owner/partnership choose one expert and the group practice choose another. Even if estimates differ, conscientious appraisers help remove a potentially divisive issue. Most lease terms run for five years, so we recommend getting a new appraisal every few years. If you set rent on a yearly basis, make the new appraisal part of your annual planning routine. And to put the issue at further arm’s length, let the expert set the fair rent each year for you.

This nugget was adapted from Paying Partners: Buy-In, Pay-Out and Income Division Strategies, from Advisory Publications, a division of HCPro, Inc. To order, click here or call their Customer Service Department at 800/650-6787 for more information.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.