The Advantages of Ownership

In my role as a management consultant and advisor to the dental profession,  one of my core principles is that if at all possible, a doctor should own the dental practice location and not rent. Over the years, I have probably helped more than 75 doctors acquire a building or a condo space, and I cannot remember even one situation where the results were not beneficial. In this current low interest rate environment, owning makes even more sense. Commercial real estate prices are still depressed, construction per square foot is as low as I have ever seen, in most situations there is rarely more than a 10% down payment required, and fixed mortgage programs for 15 to 20 years are amazingly attractive.

The major reason to own is the opportunity to build equity. The monthly payment goes to you–not the landlord. At the end of 20 years, you own your condo or your building free and clear. When you rent, that money has bought you nothing. Even if there was no appreciation in value over the length of the mortgage–highly unlikely–you now own an asset that you can sell or rent. Investing in real estate that you occupy is a major advantage because renovation costs for a dental practice are expensive, and are special-purpose for that business only. If you own the building, then all that investment remains with you the owner rather than being forfeited at the end of a leasing relationship.

The clinical path that I observe for the large majority of dentists is an associateship leading to an eventual outright purchase of that practice or another dental practice. For financial considerations of debt, the dental office space is often not included in the purchase. Usually a lease is secured with an option to buy in the future if in fact the selling dentist is the owner of the facility. It is at this critical juncture – when the lease is expiring – that a decision must be made to buy – or to extend the lease – or perhaps to move.

I realize, that as with most things in life, timing is everything. If you decide to purchase your office space, it will be one of the major investment decisions of your career. In my experience, the biggest obstacle to continued growth of a dental practice is the lack of an adequate facility. So perhaps it is time for a serious gut check on your future. These current low interest rates won’t last forever. Money currently is so cheap that the cost of acquiring property is not much more than renting. If you currently rent–and you are getting close to renewal time under the terms of your lease–I encourage you to reassess your opportunities.