Whether buying or leasing your dental practice, it requires a major financial investment. In fact, the average cost of rent alone was between 3-6% of collections depending on the size of the practice. It can often be difficult to choose between buying and leasing regardless of if you are searching for a new office or renovating your existing one. There are several pros and cons to each. Let’s look at some of the options which can help you choose the best one for your practice.
Advantages to Owning:
Fixed Overhead. Owning your own practice means you will know what your future costs are and won’t be surprised by lease hikes or price increases once your lease is up.
Financial Flexibility. Owning the practice makes it so that the asset can be used for collateral to pay debt or equity financing should it be needed.
Appreciation and Additional Revenue. Your property value will most likely increase over time, allowing you to build equity. Ownership also brings the opportunity to sublet for additional revenue should you have extra space to do so.
Tax Advantages. Expenses like depreciation and interest on your loan are deductible.
Disadvantages to Owning:
Tying Up Capital. If your practice is just starting or in the growth phase, you may prefer liquidity rather than purchasing commercial space.
Cost Saving May be Negligible. When you lease, the cost of property taxes, maintenance, repairs, and insurance are all included in the lease agreement. If you own the practice instead of leasing, these responsibilities are up to you.
Possible Decline in Property Values. There is no guarantee for appreciation with any property. There is also risk for depreciation in values. Changes in demographics, taxes, or economic conditions can all make selling your property difficult.
Ultimately, there is no right answer. To make the correct choice for your practice, have a professional that specializes in healthcare real estate who can help you answer all the tough financial questions regarding your needs.