If you are setting up a new dental practice, you are going to have a great many important decisions to make. These are decisions that will not just have a short term impact, but can impact your dental practice and its well-being far into the future. Consider, for instance, where you are going to establish your practice. You’ve found the right area and now you are looking for precisely the right space. Are you going to want to find space to buy or space to lease? The somewhat unsatisfying answer is, of course, that it depends. It depends on a great many things. Let’s take a look at some of the advantages and disadvantage of buying or leasing a dental practice space to help you thoughtfully approach this critical business decision.
Should You Buy or Lease Your Dental Practice Space?
If you talk to financial advisors, you will find that, in most cases, they will say that real estate is a wise investment strategy. As such, you may want to consider buying your dental practice space. Real estate holdings can be a strong part of a robust investment portfolio and help carry you into a comfortable retirement. In purchasing your dental practice space, you may also be purchasing space available to other renters. The rental income will provide a nice passive income stream. Owning also means that you are paying down your debt as you use the space leading to the building of equity. Last, but certainly not least, you may learn from your CPA that there are notable tax advantages to owning as you will have deductible mortgage interest, reducing your tax liability and increasing your income.
Owning your dental practice space, however, does come with certain disadvantages. Of note, you may start off your practice being cash poor. This is because buying the property will probably require that you make a down payment ranging anywhere between 10% to 20%. There is also the fact that property management can be very time consuming and there are certain risks associated with owning commercial real estate. Tenants can be unreliable. Injuries may occur on the property.
You may be considering leasing your dental practice space as opposed to owning it and this can be a solid choice for a number of reasons. For starters, your move-in costs are likely to be much lower when you are leasing. The landlord is even likely to help cover some of the costs to improve the space and make it the best possible fit for you and your practice. If you are a shrewd negotiator, you may even be able to lower your monthly costs associated with leasing the space.
With a lease, you also have much more flexibility. You can relocate further down the road because you are only committed for the length of the lease. This means that, if the location is not serving your practice or goes downhill at some point, you can always leave.