How Does Real Estate Play into a Dental or Medical Practice Transition?

When to keep and lease versus sell.

Healthcare professionals often have a goal to own the real estate that houses their practice. If you have achieved this target and are now looking to sell your practice, you may be wondering how owning the real estate factors into the transaction.

Generally speaking, if you own your practice’s real estate, you have three options during dental or medical practice transitions:

1. Keep the real estate. Practice Transitions Group will help you write a market lease and you will become a landlord.

      Pros: You will keep your investment and have a monthly cash flow.

      Cons: You will have less liquid capital for retirement. Keeping money in real estate is good for long-term gain, but if you need to reach a specific financial goal for retirement, this may not be your best option.

      Who it’s for: This is a great option if you’re selling to a Dental Service Organization (DSO). Corporations are usually less interested in purchasing the real estate that comes along with a practice because it is not aligned with their strategy. This approach is well suited for a mid-career practitioner with time to build wealth.

2. Sell the real estate to the doctor buying the practice. 

      Pros: This option can make your practice more appealing to a purchasing doctor who wants the option to also own real estate. As a marketable asset, many doctors looking to own their own practice are also interested in being their own landlords, if the financing is within reach.

      Cons: On the other hand, if you prefer to sell your practice along with the real estate, it may narrow the pool of interested or available buyers. View this as an option and not a requirement in order to optimize your market strategy.  

      Who it’s for: This is a great option to make available to purchasing practitioners who are interested and have the means to diversify their investment.

3. Sell it to an unrelated buyer. Our sister company is Practice Real Estate Group. We are real estate professionals too and will take the value of your commercial real estate into consideration to help develop a comprehensive strategy.  

      Pros: Splitting up who purchases the practice and who purchases the real estate offers more options to find the best fit for each deal.

      Cons: This option splits up the transactions between real estate and practice. However, the cons are not significant for either party.

      Who it’s for: This path is for an owner selling to a practitioner who may not have the financing available to also purchase the real estate or who may not be interested in taking on real estate. Commercial real estate funds exist that have more purchasing power.  

Summary

When it comes to dental and medical practice transitions, options increase flexibility and flexibility increases marketability. If you are looking to sell your practice, stay open to possibilities and it will offer you the best opportunities moving forward—either in becoming a landlord or with closing on a successful sale of a property.    

Morgan Burrell

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