Dental Leases for Two of Five Dentists

Dentists and commercial real estateThree out of five dentists own their dental practice facilities, while the remaining 40% rent, this survey found. Fortunately, only 4% of dentists are worried about their business mortgages.

Commercial real estate is going to be the next shoe to fall,” declared a Florida dentist. “It may be possible to use this period to do some renegotiating, particularly if you are on the downhill side of the mortgage.”

Of the dentists in our survey…

  • 24% own their building free and clear
  • 32% own and pay a reasonable mortgage
  • 4% are worried about their mortgages
  • 20% have long-term dental leases
  • 20% have leases up within the next 2 years

Here’s what else dentists had to say:

  • “I think that in a down economy the landlord should also expect lower rent.” (California periodontist)
  • “Buying my building was one of the best investments I ever made, but it was a tough first 7 years.”
  • “Our area has become run-down. We wish we could afford to move.” (North Carolina dentist)
  • “It costs so much less to lease.” (New York dentist)
  • “I will be paid off in 4 years. I built a duplex, rent the other side to another dentist. Cash flow is negative, but it currently nets $1,000 to principal per month and pays all the interest. In 14 years it will paid off and rent free. It won’t be tax and insurance free, but it will make a $60-65k a year difference in income the first year it is paid off. Rent if you plan to grow, but own for the intermediate to long term (15+ years).” (Texas dentist)
  • “I own the building outright, free and clear. I lease the building to my dental corporation. It works out well.” (Virginia dentist)
  • “Will be owned free and clear in one year. Better to own and move when/if you want to, rather than depend someone else.” (Oregon orthodontist)
  • “I would like to own it. With this economy, the prices of commercial real estate are falling rapidly, indicating that this could be a possibility.” (Florida dentist)

Read more: Dental Leases and Dental Mortgages

The Dental Office Lease: Often Better than a Mortgage

Dental office leases may be beter dental practice managementThis 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:

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.


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