Understanding the Financial Assumptions Behind the Model
Interpreting loan, tax, and term variables in ownership analysis.
By Jason Price | NextSite Consulting
Every ownership comparison relies on financial assumptions. Knowing how those inputs—loan rate, tax rate, and term—affect results helps doctors make realistic decisions when reviewing proposals or lender estimates.
Key Inputs
- Purchase Price: $450 / SF (typical medical office build cost)
- Down Payment: 20 percent (SBA 504 or conventional financing)
- Interest Rate: 6.5 percent (reflects current owner-occupied rates)
- Term: 20 years (balances cash flow and equity growth)
- Tax Rate: 35 percent (illustrative marginal rate)
- Depreciation: 39 years on 80 percent basis (standard schedule)
- Rent Escalation: 3 percent per year (average lease increase)
Interest vs. Principal
Interest and loan costs are deductible; principal builds equity. This distinction explains why ownership’s accounting cost differs from its cash cost.
Opportunity Cost and Inflation
The model does not impute investment return on your down payment. Lease escalations approximate inflation, so results are shown in nominal dollars for clarity.
Entity Structure and DSCR
Assumes a pass-through ownership structure leasing to the practice entity. DSCR analysis can be layered in for bank presentations.
Next Step
NextSite can apply your actual financing terms to produce a lender-ready summary for your advisors.
