Renting, Buying, or Building a Birth Center

February 12, 2021

Renting, Buying, or Building a Birth Center

I have been asked so many times about the pros and cons of different options with starting a birth center. Should I build my dream center? Should I remodel an older building how I want it to save costs? Or should I rent a small space for a while until we save enough money for our final location? Each midwife’s business plan will help determine which option makes the most sense for you. It really depends on your start up capital funding, long term goals of practice, and services you will be offering.

I thought it would be helpful to a common breakdown analysis I do with consulting clients when deciding what is best for them. Common questions I ask that you can directly think about when planning your birth center: What services will you offer? If you want do just do births and keep things simpler, it might make more sense to have a smaller space leased with inflatable pools for the waterbirth experience. What are your state regulations like? Some states don’t allow inflatable tubs and need a more concrete set up facility versus just a home turned into a birthing center. Some states are better to build than try to remodel a building to very specific handicap accessible dimensions of birth rooms and their bathrooms. Some states don’t even have any birth center regulations and midwives look more towards AABC (American Association of Birth Centers) and CABC (Commission for the Accreditation of Birth Centers) for birth center layout and standard support.

When of the biggest questions I ask that will lead most of the decisions for birth center purchase, build, or rent discussion is, “How much money do you have to start this practice?” Many midwives start out small using their own working capital to start the birth center. They can’t financially invest into a down payment to build a center or purchase established space that needs to be remodeled. Those midwives tend to lease a small space for prenatal room and have a birth room while starting out with intention of purchase their final location in 3-5yrs once funds are available and birth volume increases. This is an option, but a harder path to pick. As the practice gets too busy too fast, there is pressure to find another location and pay more money than necessary for the remodeling costs.

Remodeling a building is cheaper than building right space initially. Long term with maintenance and structural layout challenges with expansion and birth room layouts tend to make remodeling more expensive. If you can get a bank loan, private investors, or business partners that will contribute more to financial start up capital while you as the midwife contribute more sweat equity to the project, building a new facility is the nicer path to go.

I would like more midwives to think more the direction of lease to own a build. It is the perfect win-win situation for lower start up fund birth center projects while still building up equity in a long term building for use. Pick a location to lease that the current owner would like to sell in the future. Motivated sellers definitely help to think creatively of lease to own options. I personally did this with my birth center and it worked out perfectly. There was a chiropractor had his prior location for sale over 2yrs couple blocks from local hospital with Labor and Delivery services in my husband’s home town. He owned the building free and clear and was paying for overhead costs on building while it was sitting vacant. I created a win-win situation proposal. I gave him his asking price for the building, but with my TERMS on the purchase. I have done years of real estate investing and knew some great things to propose to make it a great deal long term.

I offered him his purchase price, but would close on building in 3yrs versus now. We would lease building first three years while portion of rent was going towards purchase price, do our birth center room remodeling, and provide a very minimal down payment for his commitment to the deal. It was pretty easy conversation since this building was losing him money the last 2yrs and a very unique layout for a traditional business (perfect for what I wanted). We got a SBA loan for remodeling of two birth centers and start up costs. Paid our rent monthly and closed on the building in three years with bringing no funds to closing since my rent was counting towards lowering the costs of the building purchase. It was amazing to know this was our long term location, minimal start up costs, and purchase building with no money required at closing! I tell you this story to inspire creativity and always look at win-win situations with people. This gentleman needed to sell his building and I wanted his space.

Whether you look at renting, building, or remodeling an existing building, take the time to look at surrounding neighborhoods, short and long term goals for practice, initial funds available for starting building, and cost of existing buildings in your area. Right now, there are lots of commercial properties hurting for leasing tenants and selling their buildings. I would bet in most towns, it would make more financial sense to negotiate great deals like the lease to own or purchase at discounted rate commercial property that is zoned to allow a birth center facility. There is so much opportunity out there for you to start a birth center and don’t necessarily have to build your dream location!