If I am buying a practice, how should I approach the option of buying the real estate?

This decision is the classic “rent versus buy.” As a starting point, compare the total monthly payment under a rental agreement versus monthly debt service. Include all costs in this analysis, including rent, insurance, property taxes, etc. under each scenario. Assuming some of the costs under each are similar, look at the purchase price versus the appraised value. Are you getting a deal? Is the building in a rapidly growing area where values are likely to increase? Is the property well located and able to handle a growing customer base as your practice grows? If the answer to these questions is yes, it is probably a good long-term investment. As you pay principal on the loan, your net worth grows. Be sure to have the building inspected by a licensed, independent inspector to identify any major problems before you commit.