Are you wondering whether to buy or lease space for a dental practice? Selecting between owning and renting a business location is among the most important choices for many dentists. Both options have advantages and disadvantages. Making a decision takes due consideration and preparation.
Here are a few factors that will assist you in further understanding what each option involves. Is it reasonable to go for a dental practice for lease or buy one?
Advantages of Owning
If you’re fortunate, you’ll be able to buy commercial real estate with investors with long-term contracts to provide you with a steady stream of earnings. While the old saying that real estate rarely drops down is false, most geographical regions have seen significant market growth over time.
Furthermore, you will be paying down loans using the property, allowing you to build substantial equity. Not only is the equity good, but it will also double as a buffer against inflation, as rents typically rise by 2-5 percent per year.
Challenges of Owning
First, you’ll probably need a 10-20% down payment on the loan, which might leave you short of cash. You will now be responsible for paying the whole building’s taxes, which may be over 1% of the building’s valuation, and any capital or repair expenses that might be necessary for the tenants’ comfort.
Second, owning and managing your house necessitates a considerable time investment. When you buy a practice or start one from scratch, there are many things to consider, such as marketing, accounting, insurance, and human resources.
What Makes Leasing A Better Choice?
For a variety of reasons, a dental office rental is an excellent choice. First and foremost, location is crucial to its success. In certain ways, the right places aren’t available for buying.
When you buy, you will have to choose from a less attractive or less-trafficked area, and therefore a less lucrative location. As a result, leasing could be the best choice for your dental practice.
Dental practice leasing also enables you to relocate if necessary. While relocating a practice is costly and inconvenient, there may be times where it is the best option for your professional and personal objectives. Perhaps your community/location’s demographics have evolved and are no longer suitable for your profession.
Buying real estate for your dental practice would tie up a lot of money that could be spent on things like expanding your practice, buying dental supplies, marketing, hiring/training employees, and so on. Consider if investing in market growth for your primary business, a dental practice would have a better return than real estate.
When weighing the benefits and drawbacks of owning vs. renting dental office space, keep in mind the stage of your career, your prospective business goals, your financial capital, and your risk tolerance.
Commercial real estate acquisitions bring an element of uncertainty to your business, diverting money, time, energy, and other precious resources from your core operations. So, dental practice for lease seems to be a better choice than buying the one.