How to invest in a medical centre: owning the practice, the building or both

“Invest in a medical centre” sounds like one decision. It is at least two, and mixing them up is where most people go wrong. One is buying a share of the practice: the trading business with its staff, systems, goodwill and doctors. The other is buying the building the practice operates from. Different income, different risks, different lenders.

This guide separates the two, shows how the money actually flows inside a typical centre, and sets out what to check before you commit. It covers business lending only: the loan is to the practice owner or the business, never to patients.

What does “investing in a medical centre” actually mean?

There are three common versions, and they suit different people.

What you buy	What you earn from	Main risk	Usual funding
A share of the practice (buy-in)	Your share of profit, plus service fees if you also work there	Doctors leaving, billing changes	Business or goodwill loan
The whole practice	All profit after costs	Everything above, plus running it	Business loan, often with equipment and working capital
The building only	Rent from the practice	Tenant stability, vacancy, lease terms	Commercial property loan

A practice buyer is buying future earnings. A property buyer is buying a lease income stream. If you do both, the practice is also your tenant, which can be convenient and concentrated at the same time: if the practice struggles, you feel it twice.

If you are a doctor buying in to work there, the practice route is usually the point. If you are an investor who does not practise, ask hard questions about who runs the day-to-day business and how you are paid.

How does money move inside a medical centre?

This is the part generic property articles skip, and it decides whether an investment makes sense.

Most centres separate the clinical work from the business. Doctors treat patients as independent practitioners, and a separate entity, usually a company or a trust with a corporate trustee, runs the business side. According to a legal guide for investors published through Mondaq and Legal 500, that service entity may provide the premises and services, employ staff, engage consulting doctors, collect service fees, negotiate leases and buy equipment and supplies.

In practical terms:

1. A patient is seen and the fee is billed, via Medicare, private payment or both.
2. The service entity collects the money as the doctor’s agent.
3. It keeps a service fee and pays the rest to the doctor.
4. The service fee covers reception, nursing, rent, equipment and admin. Accountant commentary suggests 30 to 40 per cent of billings is common, but treat that as indicative; every centre sets its own.

The same legal guide stresses that getting the service fee right is “critical for managing both cash flow and relationships”. Set it too high and doctors leave. Set it too low and the centre cannot pay its bills.

Incentive payments add a layer. The Bulk Billing Practice Incentive Program adds a 12.5% loading on eligible GP services, paid quarterly and shared between the practice and the GP (see our guide on how lenders read a medical clinic’s income). If you are buying into a bulk billing centre, ask for the last four quarterly payments and how they were split.

How do you work out what a share of the practice is worth?

There is no single formula, and anyone who quotes you one without seeing the accounts is guessing. Avant, the medical indemnity insurer, lists the factors that move the value of goodwill:

• how long the practice has operated
• the value of its tangible assets
• whether an outgoing partner is staying or leaving
• the remaining term of the lease

Add three practical checks of your own:

• Normalise the earnings. Strip out one-offs, then check what the owners pay themselves. If the principal GP takes no market-rate income, profit looks better than it is.
• Test the doctor base. If one or two doctors generate most of the fees, goodwill walks out the door when they do. Our due diligence checklist covers how to test this.
• Be wary of borrowed multiples. Deals for large corporate groups are priced very differently from a single-site clinic. A headline multiple from a corporate transaction is not evidence for your deal. Ask for an independent valuation.

What do you need to check beyond the price?

The legal guide above lists several items that sit outside the headline number but can change the deal:

• Approvals and licences. Confirm the premises are approved for use as a medical centre, including planning approvals and signage. Some licences and accreditations need fresh applications rather than transferring.
• Registrations. The ABN is not transferable. Business names and trade marks can be.
• Billing arrangements. Confirm bulk billing approvals and provider numbers, and review each doctor’s billing practices.
• Doctor and staff arrangements. Poorly documented relationships can have “significant consequences” for tax, super, insurance and termination rights. Employee entitlements such as leave may justify a price adjustment.
• Insurance. Medical indemnity, public liability, business, cyber and workers’ compensation.
• Transaction documents. Whether it is an asset or share purchase, plus ownership agreements, lease assignments, equipment finance and any deed of accession.

Contractor doctors also bring a payroll tax question, and it differs by state. Read our guide to payroll tax for medical centres before you take on a share of that liability.

The agreement you sign with your co-owners matters more than most buyers expect. Avant calls it “more than a mere formality”: it should set your stake, how costs and profits are shared and the steps if a partner leaves. Have a lawyer review it before signing.

Is the sale subject to GST?

It does not have to be. The ATO says no GST is payable on a sale of a going concern if certain conditions are met: the sale is for payment, the buyer is registered or required to be registered for GST, the parties agree in writing that it is a going concern, and the sale includes everything necessary for the business to keep operating. The seller must carry on the business until the day of sale.

The mistake to avoid is assuming it applies. If a medical centre’s assets sit across several entities, the going-concern treatment can be harder to achieve. Settle the GST position with your accountant before contracts are signed, because it changes the cash you need on settlement day.

How is buying into a medical centre financed?

Match the money to the purpose. Mixing them is how deals end up too tight.

Part of the deal	Typical fit	Notes
Goodwill and buy-in price	Business loan, often property-secured	See practice buy-in loans
Whole practice purchase	Business loan with equipment and working capital	See buying a medical practice
Equipment and fit-out upgrades	Equipment finance or staged loan	Often needed in the first year
The building	Commercial property loan	See practice premises loans
Early cash flow	Working capital or line of credit	Covers the wait for quarterly incentives

In round terms, property-secured business loans run from $20,000 to $5,000,000 as first mortgages, second mortgages or caveat loans over residential or commercial property. Unsecured, cash-flow and line-of-credit options for trading practices typically run from $5,000 to $500,000, sized on turnover and bank statements. Business.gov.au notes that lenders look at your income, expenses, debts and cash flow, your capacity to repay, any security and your business plan, so the same pack you assemble for the practice supports the loan.

Do not forget working capital. The week after settlement, wages, rent and suppliers still fall due, while service fees and incentives arrive on their own schedule. A buyer who spends everything on the purchase price can be short in month two.

If you want to see what is realistic for your deal, you can check your options here before you sign a contract.

Illustrative example: a doctor buying a quarter share

Illustrative only; this describes no real centre. A GP with several years at a suburban centre is offered a 25% share of the service entity. Before agreeing, they ask for three years of accounts, billings by doctor, the last four incentive payments, the lease and the contractor agreements. They find that one senior doctor, who is retiring in two years, generates a large share of fees. That does not kill the deal. It changes the price, and it shapes the agreement: a succession plan, a staged payment and a recruitment budget.

The finance follows the same logic. The buy-in is funded with a goodwill loan, with a smaller line of credit held back for the quiet months after the senior doctor leaves. The lender sees a plan, not a surprise.

Common mistakes when investing in a medical centre

• Treating gross billings as practice income. The practice usually keeps only the service-fee share.
• Buying the building because the practice looks healthy. If the practice fails, the building has a hard-to-replace tenant.
• Skipping the lease. A short remaining term can cut the value of goodwill.
• Assuming licences and approvals transfer. Some need a fresh application.
• Not documenting doctor arrangements. Tax, super and termination rights hang on the paperwork.
• Leaving working capital out of the funding stack.

You look after patients; let us look after the business side

Buying into a centre should feel like a step forward, not a leap of faith. If you have a deal in mind, or you are still working out whether the practice, the building or both make sense, we can help you see what finance is realistic for it.

Enquiring takes about 60 seconds, and there is no credit check when you first enquire, so your credit score stays untouched just for asking. We do not send your details to a pile of lenders, so your phone will not start ringing. A real person on our team reads your situation and calls you to talk it through. The more accurately you fill in the form, including the deal, the doctors and what you need the money for, the better the chance we match the right option first time.

Find out where you stand →