Need advice on purchase of medical business

[Carlos Santiago]

Hello.

I'm a board certified doctor in the NY area looking to open up another location.

I found a place that seems to be offering a good deal, but I would like the help of others to help me analyze the specifics and provide their opinion.

So, the place i'm interested in is a doctors office in great condition, a great location, 2000 usable square feet, 3 additional doctors offices not including mine, 4 car private parking lot, and is near a community that I want to specifically cater to. It also offers a lot of intangible benifits.

The owner of the property is willing to give me a long-term lease (20 years) with a 4% increase on rent that is substantially below market price. Also, I get the ability to sub-lease and with the extra space, I have the potential to work there rent free. I've given the lease to my lawyer and all seems to be quite fair.

Now, here's the issue. This is the purchase of a business. The current business owners were running some medical practices I do not wish to continue. The contract of sale will give me the right to determine who can continue to work there. I do not wish to continue running the type of medical business that's currently in place and instead wish to implement and build my own business and rent out the facility to my own colleagues. I have a dedicated patient base and I currently rent out a small office not too far from the location so I don't doubt that I can get patients in there quickly and start generating revenue. The issue lies in the fact that in order to get the rights to use the property, I need to purchase the business from the current business owners. However, with no intent to continue running that type of business, I would essentially be buying something that will not be generating any sort of revenue, atleast to begin with. On top of that, I don't expect to be up and running right off the bat, so there will be atleast a few months where i'll be paying rent as well.

The price the business owners are asking for is below market. I also get the right to implement whatever type of business I want with the ability to sell it down the line when I near my retirement. Knowing the market, i'm sure that I can sell my business for substantially more than what I'd be paying to purchase the current business. However, I just don't know if I can justify paying 250k+ for a business that will not be generating me any sort of revenue to begin. There's so much potential here, and the property offers A LOT of intangibles, but I would really appreciate some advice on whether or not this sounds like a good deal to you guys.

Thanks!