The Challenges of Relocating and Purchasing a Dental Practice Simultaneously

As a dentist, you may be looking to relocate for a variety of reasons:

• Moving back to your hometown or your partner’s hometown

• Moving back to where you went to school

• Looking for a change of scenery (weather, cost of living, political landscape, etc.)

Relocating and purchasing a dental practice simultaneously can create some challenges that you should be aware of.

Challenge #1 – Searching for the Right Dental Practice

When looking for a dental practice, you may not know exactly what part of town you’d like to be in, causing your search parameters to be too broad. Some buyers are even torn between more than one state, which can lead to decision paralysis. We have also seen spouses be interested in different locations, resulting in a lack of commitment to a practice.

We recommend you live in the area for some time to ensure you actually like it. Some places may seem desirable, but they may not be the best for practicing the type of dentistry you desire. You may not realize that the area is incompatible with your goals until you live there for a while. Purchasing a dental practice is generally a minimum commitment of 5 to 10 years, so you don’t want to feel stuck in the wrong location.

Challenge #2 – Timing

Timing a move can be challenging in and of itself, and adding a practice purchase into the mix can cause even more issues. For example, obtaining state licensing can take time, and sellers won’t generally accept an offer if you haven’t seen the practice. You will need to be flexible and travel quickly to attend showings; otherwise you may miss out on some practices. Practice sales can move fast, and sellers won’t likely delay another opportunity with a strong buyer just so you can see the practice.

In addition, transition timelines from offer to closing are typically no more than two months, and many sellers are not interested in working back for more than a few weeks, usually just to help transfer goodwill and wrap up cases. Practices currently on the market may not be a good fit for you if you need more time (waiting until summer to move, finishing your current contract or military service, etc.)

Challenge #3 – Financing

If you are planning to buy a house and a practice, you might run into issues depending on the scale of the house. A home purchase can reduce liquidity, increase expenses, decrease your debt service coverage ratio, and temporarily lower your credit. All of these factors affect the amount a lender may offer you.

Our advice to relocating dentists is to move into a rental home, and once you’re settled and know exactly where you want to be, then you can purchase a home.

Due to their financing parameters, some lenders are limited in what they can lend to buyers who are purchasing out of state. Some lenders even require you to live within the state of the practice prior to funding the deal.

If you are set on purchasing a practice before or while relocating, here is our advice:

1. Determine exactly what you want for your practice and where you want to be. Be committed to these goals.

2. Be prepared to move quickly and make a strong, competitive offer. Present yourself well to the seller. If you need a longer workback or transition period, be prepared to offer additional funds and/or earnest money to entice the seller to agree to your terms.

3. Connect with lenders who have experience lending to out-of-state buyers. Be upfront about your plans, so they can appropriately guide you through the process and let you know what is and isn’t possible. Please contact our team if you need lender recommendations.

If you are looking to relocate to the Southwest, Menlo Dental Transitions has many dental practices available for sale. We wish you the best in your practice acquisition and hope to be a resource for you now and throughout your career.