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Should I Purchase the Real Estate When I Buy My Practice?by Jason P. Wood, Esq.
When purchasing my new practice, should I buy the real estate as well?
This question is asked of our firm all the time, and almost always the answer is: if it is available, buy it! There are many reasons why acquiring the real estate of your dental practice is the right decision, even though the debt threshold can appear to be daunting.
Here are some quick reasons why purchasing the real estate is often the smartest financial decision for you and your family.
1. You are Paying For it Anyway!
Do not be afraid of this additional debt when you are buying a dental practice. Too many doctors forget that no matter what happens, when you buy a practice, you are going to be paying rent. The vast majority of the time, the purchase price of real estate closely mirrors the fair market rental rate of the area.
What this means is your mortgage rate is usually slightly lower on a monthly basis than what you would be paying in rent. Even when you add up insurance, real estate taxes and common area maintenance fees, your monthly payments will remain lower than what your rental payments would be.
Since the monthly mortgage rate remains a fixed rate, you end up paying less over time compared to the monthly rental rate a landlord would charge you, as the (relatively) normal yearly increase for rent is around 3%. When you extrapolate this over your career, this is a rather large differential you are saving. More importantly, the landlord you are paying is yourself!
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