3 Real Estate Considerations When Selling Your Dental Practice
There are so many decisions to make when you are considering the option of selling your dental practice, and you will need to work through all of the details in the contract. One of the biggest factors that needs to be addressed is whether you will sell your real estate holdings with the practice. The best thing you can do is evaluate your financial situation and the work that might be required if you choose to hold onto the real estate property after selling the practice.
Retaining ownership means that you will have the responsibility of lease servicing, property maintenance, payment of operating expenses, and rent collection. You will be the new landlord of the owners who purchase the practice.
Be cautious in your decision and evaluate whether you want ongoing involvement as a property manager after the sale of your office. If you don’t want to carry this responsibility, then it is smart to sell the real estate with the practice. But you might find it challenging to find a buyer that has the financial resources to purchase both the practice and the real estate holdings.
On the other hand, maintaining ownership of the property and signing a lease with the new owners means that you could enjoy ongoing cash flow as well as increasing equity with time. In most situations, separating the sale of the practice and the real estate is a great way to maximize overall value and the return that is available for your investment. Here are a few things that you need to consider:
With a lease that is carefully negotiated, you can enjoy consistent cash flow that exceeds your operating expenses. You can also expect a potential of increased equity due to appreciation over time. A true triple net lease is a good solution, depending on the type of real estate that you own. This lease requires that the tenant maintains responsibility for all operating expenses and maintenance. As a result, you have less involvement in the ongoing management of the property. Another solution is to hire a property management company to help with these responsibilities, although you should expect to pay a percentage of the rental income to the management firm.
One practical, convenient solution is to sell the real estate with the practice. While there are benefits to this option, you might limit the potential buyers because people don’t want to purchase both assets or they don’t have the finances to support the purchase. A combined sale might result in a decreased price in negotiations or even a delay in your ability to sell. You might be able to find a middle ground by selling the practice with a lease and the option to buy the real estate at a later date. This option makes it more accessible for potential buyers who need to transition assets.
If you sell the practice without the real estate, then the real estate could be sold to a third-party investor. It will require that the buyer signs a long-term triple net lease, and the future cash flow from that lease is sold as an investment. You must have a strong credit rating and a solid practice. But if you can meet these requirements and sign the long-term lease with the buyer, then it could be a great way to maximize the returns. Investors are attracted to triple net lease investments.
The decision to hold or sell your real estate property is up to you. It is important to look at your personal finances, retirement plans, and ability to manage the property. Additionally, it is smart to consider the current real estate market and potential changes in the industry in the future.
As you are evaluating this information, our team at JRA is here to offer the personal advice that you need. Contact us to learn about our available services.