To Sell or to Lease?
Expert Dental Attorney Offers Advice to Dentists Considering a Dental Transition
Every dentist will go through transitions in their career. That may mean opening your own practice, buying into a franchise, buying an existing private practice, or putting your private dental office for sale. Dentists on both sides of these transactions need an experienced broker to guide them through the steps of such a large purchase. One of the key pieces to the puzzle is the physical location of the dental practice. Does the practice owner also own the office space, or do they lease it? Below we discuss what buying or leasing the office space means for a practice buyer and seller.
Buying or Leasing an Office
Buying a dental practice and buying the real estate where the practice is located are two different things. If you’re in the market to buy a dental practice, think through the below scenarios and how they will affect your lifestyle. Finding a dental office for sale is only one part of the equation in buying a dental practice, which is why so many dentists choose ddsmatch Southwest to help them find the perfect fit.
If the Practice Location is Leased
The most simple transaction is one where the selling dentist currently leases their office space. More often than not, the lease can be transferred to the new practice owner with no fuss from the landlord. Most landlords would prefer to keep a tenant in the space than try to find a new one. The dentist who purchases the practice will become the new tenant unless he or she decides to move locations.
If the Practice Location is Owned
- Buying the Property Outright: buying the property from the selling dentist is another easy option. Often the purchase of the dental office property can be negotiated and closed on at the same time the practice is purchased. However, financing concerns may make this option difficult for some buyers. In that case, you need to think about leasing the property from the current owner dentist.
- Leasing the Property From the Owner: leasing the office from the dentist who is selling his or her practice is a good option if you cannot purchase it outright. The selling dentist simply needs to draw up a lease agreement, and he or she will become the landlord with the buyer as their tenant.
- Leasing with Options: if you want to buy the dental office for sale eventually, but cannot do it at the same time you are purchasing the practice then the selling dentist can draw up a lease with an “option to purchase.” This gives the purchasing dentist the option to buy the property at prearranged terms. This option to purchase could be activated by the purchasing dentist or could be based on a certain period such as three years after the lease begins.
- Leasing With a PUT Option: in this scenario, the buying dentist starts out leasing the property from the seller. The selling dentist decides on an amount of time to lease the property to the buying dentist. After the time is up the buying dentist must buy the property. This scenario works well for dentists who want to sell the practice but hold onto the property for a while.
In all of these dental office leasing scenarios, you should be aware that the property owner maintains the right to market and sell the property at any time unless otherwise stated in the lease agreement. That means even if you own the practice you could be kicked out of the office space, as long as your landlord gives you proper notice and adheres to the lease agreement. This is true even if you have an “option to purchase” or PUT option in place. Dental real estate has its own intricacies and legal hoops. Dental Economics has a great post for those trying to decide between buying and leasing dental office space. For more information about buying or leasing real estate talk to the experts at ddsmatch Southwest or call a dental attorney who specializes in these types of transactions.
Putting Your Dental Office for Sale
If you want to sell your dental practice and you own the office space think through these pros and cons of selling the office space vs. leasing it to the new dentist.
- Becoming a Landlord: if you decide to lease out the office space, you will become a landlord. If you own other investment property, then you already know what it takes to run this type of investment. Having a steady cash flow can be great, especially if you are transitioning out of full-time practice. In the long run, you will make more money leasing and can sell the property when it grows in value. Be aware of the potential pitfalls of managing rental property though, such as cash flow problems, keeping up with regular maintenance, being on-call, and potential evictions if the practice does not take off.
- Selling the Property: if you decide to put the entire dental office for sale, stepping away from the practice and the property for good, it can be a freeing decision, particularly if you are entering retirement and don’t want to deal with the ups and downs of property management. The downside to selling is that you are narrowing your potential buyer pool. Buying the practice and the office at the same time may disqualify some buyers.
Working With Experts
Whether you are putting your dental office for sale or looking to purchase an office, ddsmatch Southwest can help you find the perfect match. We work with buyers and sellers to narrow down their wants and needs then match them up with someone who fits their qualifications. To learn more about what we can do for you, schedule a consultation today.