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What to Consider When Buying a Practice with Real Estate

Are you looking to buy a new dental practice? Have you considered purchasing real estate along with the new dental practice? Buying a dental practice and the attached land can be a great way to grow an existing dental practice or build a new one of your very own. Regardless of whether you are a first-time buyer or a seasoned dental practice and real estate purchaser, these are multi-layered transactions that should be approached with care. Buying a dental practice alone has many important factors that should be considered. Adding the real estate purchase on top of that adds another layer of complexity. Here are some things you should consider when buying a dental practice with real estate.

What to Consider When Buying a Practice with Real Estate

Before diving into what may be some overwhelming considerations you may not have thought about when you first approached the idea of buying both a dental practice and the associated real estate, it is important to be clear that this type of buying arrangement can be a worthy endeavor. It can grow your practice and your equity. The challenges are manageable. The rewards can be great.

First things first, you will need an appraisal for the dental practice itself and a separate appraisal for the property. While you are purchasing the real estate and the dental practice at the same time, try to think of them as two separate transactions. Your lending bank will also likely require you to get a separate appraisal just for the property. The real estate will also be a factor in the appraisal of the dental practice’s value, but that is separate from the value of the land in and of itself.

There will also likely be additional insurance requirements when you purchase a practice and real estate. Dental practice owners may be familiar with the usual coverage expected of them such as life insurance, disability insurance, general liability insurance, and malpractice insurance, but may not be as familiar with the insurance coverage required of someone who owns commercial real estate. After all, there are likely to be different insurance expectations of a building owner as opposed to a building tenant. Your lender is likely to require some additional forms of insurance coverage.

Remember, think of this as two separate transactions, because that is really what is going on. It is also why there will likely be more than one closing. This makes complete sense when you think about it. After all, you will need to close on the purchase of the practice itself and have the practice owner transfer ownership of all of the practice’s assets and other things. Then, you will need a closing on the real estate portion. Yes, you guessed it. This will involve a mountain of paperwork. Fortunately, these two closings can often take place at the same time. This is referred to as a “contemporaneous closing.”

Dental Law Attorneys

At Mahan Dental Law, we are here to help protect you and set your dental practice up for continued growth and success Let us assist you with the complex transactions needed to establish and grow your dental practice. Contact us today.