Thomas L. Snyder, DMD, MBA Managing Partner The Snyder Group, LLC Printer Friendly Version

Selling Your Real Estate With Your Dental Practice: It’s Not Always Easy!

Many practitioners have made the wise decision to purchase real estate instead of being a tenant. Based on where you practice, the value of your real estate may be quite substantial. Unfortunately, in today’s economy, considering the sale of your real estate along with your practice may not be the best financial decision to make today. Whether you defer your real estate decision or not, we have found that when the value of your real estate is in excess of the value of your dental practice, it is often very difficult to sell both assets simultaneously. Purchasers of commercial real estate face a down payment requirement of anywhere from 15–20%. Here are a few options to consider if you want to sell your practice but are indecisive on the real estate:

Become a Landlord: Some national dental lenders will loan the down payment or a portion of it for the mortgage and fold it in with the practice acquisition loan. However, if the practice is worth less than the real estate, chances are this will not work. Therefore, buyers must have their own assets to provide the real estate down payment; not all potential buyers will. If you are faced with this dilemma and you want to retire, you may consider remaining as a landlord. Even if you plan to leave the area, you can engage a property management company to maintain your property in your absence. Besides, the rental income you’ll receive may be good supplemental income.

In this instance you offer the purchaser a right of first refusal to purchase the building at a future date at a current fair market value. Even though many purchasers do not buy the real estate initially, in two to three years they often have a change of heart. Why keep paying rent when you can purchase the building and begin to build up equity? A few years later they may be in a better financial position to afford the down payment.

Selling to a Non-Dental Investor: If the value of the real estate is considerably higher than the practice’s value, you may have to find an independent buyer to purchase your real estate. Dentists are considered great tenants and the non-dental purchaser can be assured of a long-term tenant. If you have additional tenants in your facility who are paying a lot of rent you may even have a great number of non-dental buyers interested in your property.

Sell Your Patient Base and Refit Your Professional Space: If you have a practice with lower revenue in an attractive building and location, it may be harder to sell the practice. Therefore, you may consider finding someone to purchase your patient list while refitting your dental space so that it is acceptable to a wide range of non-dental buyers. Although this may cost you a good deal of money to do so, if your real estate value is substantial this strategy may make the most sense.

The bottom line is that when your practice is worth considerably less than your building, you need to be prepared for the possibilities and how they may affect you.

Dr. Thomas L. Snyder is Managing Partner of The Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With more than 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can be reached directly at 1.800.988.5674.

If you would like additional help, email Dr. Snyder at drsnyder@thedentistsnetwork.net.

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