Is it better to rent or own your practice building or space?
Renting your practice space may have been the best way forward when starting your first dental practice or even your second and third so as not to tie up all important cash; but there comes a time in every dentist’s working life where they truly want to call their practice environment their own.
There are many rewards that come with owning one’s own practice space; though there are risks, too. Buying a practice or building one from scratch have many obvious long-term benefits for dentists looking to establish their own space. But what’s the definitive answer to the question – is it better to rent or buy your practice space? Or design and build from scratch?
The existing practice option
Dentists looking to own their own practice building may seek an already established run-down practice building that can seemingly be tweaked to their requirements. The reality is that while the practice may be operational and probably once was modern and functional, the distraction and disruption to operations when it comes to adapting and renovating the practice to suit your unique requirements is significant and would most likely involve a complete shutdown. It is always worth keeping in mind that one day the time will come to give yourself the practice environment that you deserve.
Rent increases vs. paying off a mortgage
Dentists often lock in 5x5x5 year leases when securing a space to fit out and operate a practice. Rent can increase annually, which is a variable cost of business you will have to wear or pass on to your customers. A leased practice space may make sense on paper, but as the saying goes, “rent money is dead money” – it goes to a landlord instead of building equity in an asset you own and can potentially sell for a profit in the future.
The commitment factor
Some dentists baulk at committing themselves to buying or building. Renting seems more flexible by comparison. However, committing to a five-year lease without anything to show for it at the end makes little financial sense over the long term. Spending $5,000 in rent per month is an outlay of $300,000 over 5 years. That $300,000 could have gone towards building equity in a practice which you could then sell either as property or as an entire business.
Buying land and building gives you the freedom to customise your practice to your unique requirements. It allows you to create the ideal patient flow and practice efficiency experience for patients and colleagues. You have flexibility as to location, such as a major growth corridor, medical precinct or high-traffic retail area. Problems such as parking or accessibility can be ironed out by design. Extra space for additional services can be allocated ahead of time and be ready when you decide to expand the practice.
These few points are food for thought and we encourage you to keep an eye on our blog as we interview some very successful multi-practice owners to get their thoughts on this currently trending topic.
To find out more, talk to Optima about integrated project delivery solutions for your dental practice.