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Three out of five dentists own their dental practice facilities, while the remaining 40% rent. Fortunately, only 4% of dentists are worried about their business mortgages.
"Commercial real estate is going to be the next shoe to fall," declared a Florida dentist. "It may be possible to use this period to do some renegotiating, particularly if you are on the downhill side of the mortgage."
Of the dentists in our survey…
- 24% own their building free and clear
- 32% own and pay a reasonable mortgage
- 4% are worried about their mortgages
- 20% have long-term leases
- 20% have leases up within the next 2 years
Specialists are more likely to own their facilities than are general dentists.
Buying is an investment
- “Buying my building was one of the best investments I ever made, but it was a tough first 7 years."
- “I have rental spaces that provide a monthly income.” (Oklahoma dentist)
- “Our area has become run-down. We wish we could afford to move.” (North Carolina dentist)
- “I rent from my ex-husband who got the building in the divorce settlement. Yikes!!” (North Carolina dentist)
Some like leasing
- “It costs so much less to lease.” (New York dentist)
- “I renewed my lease this summer for 5 years with another 5 year option.” (California dentist)
Strategies for dental practice management
- “I will be paid off in 4 years. I built a duplex, rent the other side to another dentist. Cash flow is negative, but it currently nets $1,000 to principal per month and pays all the interest. In 14 years it will paid off and rent free. It won't be tax and insurance free, but it will make a $60-65k a year difference in income the first year it is paid off. Rent if you plan to grow, but own for the intermediate to long term (15+ years). As a dentist, you have a lot of long-term capital investment, so you are in it for the long haul either way. You don't want to lose your lease (and finish out) so don't cut yourself short, but a long-term lease is practical if location is absolutely critical and there is no opportunity to own. Limits should be placed on increases in rent or tied to the market in some way way to prevent being held for ransom from an aggressive landlord who knows what it costs you to move.” (Texas dentist)
Commercial real estate is tanking
- “Commercial real estate is going to be the next shoe to fall, and small banks know this. For this reason, they are willing (and it makes good business sense for them) to extend the debt, rather than have to deal with a non-performing loan. It may be possible to use this period to do some renegotiating, particularly if you are on the downhill side of the mortgage.” (Florida dentist)
- “I think that in a down economy the landlord should also expect lower rent.” (California periodontist)
- “Bought my building and moved April 08 . Practice-wise it has been good, but I cannot rent out the other side of my building and am upside-down in my mortgage. My only regret is not moving sooner.” (Georgia dentist)
- “I bought half the building. Then my partner died, requiring me to purchase the other half and rent. A poor investment.” (Wisconsin dentist)
Lease your building to your practice
- “I own the building outright, free and clear. I lease the building to my dental corporation. It works out well.” (Virginia dentist)
- “I own the building free and clear personally and lease it to the business. Provides extra income without Social Security tax liabilities.” (Georgia, not a dentist)
- “Will be owned free and clear in one year. Better to own and move when/if you want to, rather than depend someone else.” (Oregon orthodontist)
- “One more year and it will be paid off!” (Florida dentist)
- “The mortgage will be satisfied next April.” (Florida dentist)
- “How do I get value out of it when I sell my practice?” (Oregon dentist)
I wish I could buy my building
- “I would like to own it. With this economy, the prices of commercial real estate are falling rapidly, indicating that this could be a possibility.” (Florida dentist)
- "I tried to buy, but the building is owned by a trust. Not selling no matter what." (California dentist)
- "Looking at option to own own building also." (Illinois pediatric dentist)
Trying to negotiate a better deal
- “My landlord wants to raise rent over a period of the next 5 years, but we need to negotiate due to poor real estate market. It's not proportional to environment.” (Illinois dentist)
- "How does the lease negotiator you recommend compare to the well known 'Lease Shark'? I need to make a decision on a negotiator soon."
Note: Survey sample included 179 respondents.