Dental Practice Management Editorial: The Dental Office Lease Is Often Better than a Mortgage

The Dental Office Lease: Often Better than a Mortgage

This week I learned that 60% of dentists responding to my survey own their dental practice facilities, and 40% lease.

Frankly, I’m surprised more dentists don’t lease. Owning your practice’s building can get complicated.

Here are some links you may find interesting:

Check out the full dental real estate survey results
Economic Downturn? Renegotiate Your Dental Lease! by Jim Du Molin
Most Dentists Forget the Risk Costs When Leasing Office Space by lease negotiator Lewis Gelmon
Dental Dilemmas in Real Estate by Lewis Gelmon
Dentists Don’t Sell Their Practices, They Sell Their Leases… by Lewis Gelmon

Here’s my take: I’m not personally a fan of buying and owning your building because it’s an added complication to liquidation upon sale or transfer of your practice. Plus, there can be all sorts of contingent problems.

It’s been easy for dentists to buy commercial real estate. Historically, they’ve been qualified for loans almost automatically because dentistry is such a stable business. You sort of need to be a real screw-up to fail in dentistry, and banks know this.

With commercial real estate tanking, however, the issue for all dentists today is: Are you located in or near a commercial real estate center that may now be in trouble?

Empty storefronts mean reduced property values, and fewer employed people passing through the area to use your services. (The upside is that it is a great time to renegotiate your lease!)

Owning has worked out great for some dentists, but one of the major dangers of owning is that neighborhoods can go downhill. What if they start selling crack cocaine right in front of your office, and you don’t have an economically viable way to move?

Of course, the major danger of leasing is getting taken advantage of by your landlord. So many dentists don’t call the dental lease negotiator until after they’ve signed the paper…

My recommendation, when leasing a new facility, is to NOT contact the landlord personally. No matter how savvy you are about real estate, your potential landlord sees you as an easy mark. This is his or her full-time business, and he or she knows every trick in the book. Use a professional leasing negotiator to make the contact and determine if the property is right for you.

If you currently have a lease, start your negotiation at least TWO YEARS before it expires. The shorter the time line to the lease expiration date, the more money it will cost you.

There are several great lease negotiators out there. You want one with a proven track record in DENTAL OFFICE LEASING. I often recommend Lewis Gelmon… And no, I don’t get a referral fee.

http://dontics.org/forum Stanley Sokolow, DDS

When you have a lease, you are vulnerable to downturns as well as upturns in the local economic factors. With a mortgage, you have more stability in costs. Dentists can’t pick up and move on a dime like most businesses because we have roots in the building: plumbing and walls. A business office with a bunch of desks and modules can just call the movers and be relocated in a day or two. We’re stuck until we invest in extensive leasehold improvements. I was a dental tenant in an office building in the Silicon Valley area (San Francisco peninsula of California) during the so-called dot-com boom while my lease came up for renewal. The venture-capital-rich start-ups and their servicing companies, including lawyers and accountants, drove up local rents astronomically while I was trying to negotiate a new lease for just a modest increase in rent. It was tough going. Meanwhile, my competitors were in buildings that they had purchased, so they were immune to the local boom and bust economy. Stability of our costs is a factor to consider in the lease/buy decision.
http://www.cdfasmiles.com Nick Laoutaris,DDS

I have been an investor in real estate for 20 years,(since the age of 19). I am also a dental contractor, and while it is true that a lease would be a better way to go for a young dentist, purchasing of the real estate in today’s economy is a smart move. The buyer does have more negotiating power, and if it is in an area that has been stable, you can’t lose. The average build out for a new office, of about 4 chairs with equipment could be anywhere from 300 to 400k. The dentist could always sell the practice and lease the building in his retirement. It is true that a dentist is still considered a safe risks by banks so assuming your credit score is decent, a loan should not be a problem. Most dentists are on a triple net lease and if you run the numbers you will be surprised that ownership is not out of the question.
http://genarojanacek.blogsmagic.com/ Leigha Stirgus

Thanks, that makes sense!
http://www.acoadental.com/home.php Daniel Todman

Well, starting up businesses like dental service is really challenging. You have to assess well your plan and such options if those would fit your needs and your clients. You may ask the opinion of some experts like healthcare developers about leasing and buying and owning a building. They may give you idea about choosing which of them would be the best for your business.