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Pros And Cons Of Buying Vs. Leasing Dental Office Space

Pros And Cons Of Buying Vs. Leasing Dental Office Space
by Jeremy D. Behar

When establishing a dental practice, one of the many decisions you may face is whether to buy or lease your dental office space. There are advantages and disadvantages to each, and making the best decision for your business depends on a variety of factors.

Here are a few pros and cons of buying vs. leasing dental office space that you should keep in mind when reviewing these options.

Buying commercial space

Property ownership pros and cons

Buying a building or other commercial space provides flexibility over how to use the space and the freedom to control the property, as you are, in essence, your own landlord. You also have the opportunity to build real estate equity. These are the primary benefits of buying.

On the other hand, buying commercial real estate comes with its own disadvantages and risks. First and foremost, buying real estate for your practice requires a large up-front financial investment. You will be taking on quite a lot of debt in the form of a mortgage, and of course there are risks associated with any real estate investment.

A dentist who purchases will also acquire a great deal more responsibility. As a landlord/property manager, you will have increased duties and obligations that will take time and concentration away from the core business of dentistry. 

Protecting Company A and Company B

Acquiring a commercial property is expensive and comes with certain liabilities. It is recommended to keep your real estate investment and dental practice as separate business entities so that it's not "the dental practice" that is buying the real estate. This helps to maximize the value of each, and also separates the applicable responsibilities and liabilities.
A properly structured dental office lease agreement should be created between the two businesses to provide further protection. This will be important should either be sold in the future.

Selling as a property owner

At the time of retirement/transitioning, a dentist who has purchased the property of his/her dental office either transitions into a landlord or sells the property. However, it's often quite difficult to sell the dental practice and the real estate property to one buyer.

In the case of dentists who lease their office space, as long as assignment provisions are well-negotiated in the dental office lease agreement before signing it, they will have the flexibility to sell their dental practice or transition out of it by transferring the practice to another dentist, risk and hassle-free.

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