Should You Lease or Buy Dental Real Estate?

Dental professionals—whether fresh out of dental school or well established in their career—must make decisions about their real estate. Many of our dental clients wonder whether they should lease or buy a property for their dental office. As with any type of real estate, both leasing and purchasing dental property have their benefits, which we will outline here to help you get started.

Benefits of Leasing Dental Real Estate

Many dentists decide to lease space and find this works best for their practice. When leasing, they may enjoy more location options, flexibility and liquidity.

More Location Options

Depending on the market, dental professionals may have more space options available when looking to lease. Location plays a large role in the success of your business. During your property search, you may consider the factors such as:

• Visibility from major roadways
• Patient demographics in the area
• Proximity to competing practices

If you struggle to find properties for sale that match your business plan and budget, you may be better off leasing a space.

Flexibility

A fluctuating economy and other factors may affect the growth of your practice. When leasing a dental property, you can more easily relocate your practice should you outgrow a space. Likewise, if the business doesn’t take off like you anticipated, you can more easily downsize instead of being stuck paying a mortgage you can’t afford for a space you can’t fill.

Liquidity

Some analyses show that leasing property is more expensive than purchasing in the long run. However, you should consider leasing your dental office if you need capital for purchasing dental equipment, training staff, marketing and fulfilling other business needs. Many dental practices, especially those just starting up, do not have the necessary capital to cover a down payment, due diligence fees and closing costs.

Benefits of Buying Dental Real Estate

Dental professionals may also prefer to buy a space due to cost certainty, equity and appreciation, and autonomy.

Cost Certainty

When you buy a dental property, you have more certainty of the costs you will incur, as your mortgage payment remains relatively stable. On the other hand, lease rates are constantly rising, which can add up over a 20- or 30-year dental career.

Equity and Appreciation

You build equity when you buy property. Your down payment, continued mortgage payments and property improvements all increase your equity. As a property owner, you will likely see your asset appreciate in value over time, leading to a financial gain when you decide to sell.

Autonomy

When you own a property, you have complete control over its use, design and repair instead of being subject to a landlord or property manager. You are also free to lease out part of the space as a way to earn extra income. Many dental professionals enjoy this sense of autonomy.

How to Decide

Many factors play a role in a dental professional’s real estate decisions. To decide whether to lease or buy dental property, ask yourself the following questions:

Where are you in your career?

The stage of your career may influence how you proceed in choosing a location. If you’re near retirement, it may not make sense to buy property this late in the game. If you’re just starting up, you may not have the financing to buy a space and may be best to lease for a few years first.

What are your business plans?

Your business plans also influence your real estate decisions. If you expect high growth, you may want to lease a dental office and switch locations when you outgrow it. You could also consider purchasing a property with excess space to grow into.

What is your financial situation?

Dental professionals should take an honest look at their financial situation. Would you qualify for a loan to buy a space? Do you have the funds to cover the upfront costs of purchasing real estate and continue running your practice? The answers to these questions can help you decide whether to lease or buy.

How willing are you to assume risk?

Purchasing real estate can be risky, so your decision should take into account your tolerance for risk. Your asset could depreciate in value due to economic recession, natural disasters or diverted roadways, and you need to be aware of and prepared for these scenarios.

Your real estate decision is unique to you and your practice. Contact a member of our dental representation team to conduct an Ideal Space Buy vs. Lease Analysis for your practice.