How Does Homeownership Affect Your Ability to Buy a Dental Practice?

By David Haynes, MBA, Vice President of National Practice Sales

Buying a dental practice and buying a home are two of the most important purchasing decisions a dentist will make. This blog post outlines how homeownership can affect your ability to buy a dental practice.

Prospective Homeowners

Many dentists desire to purchase a house at about the same time that they purchase a practice. They have graduated from dental school, they are perhaps moving to a new city, and they are ready to put down roots in the place where they will be growing their business. 

Buying a home and practice simultaneously can be difficult. If you close on a house first, you will drain your liquidity and create increased debt service with your mortgage payment, which can make it more difficult to underwrite your practice loan.

If you buy your practice first, you will now be considered the owner of a new business. Since many banks don’t underwrite to new businesses, you may have a more difficult time finding a mortgage lender shortly after purchasing your practice. 

We recommend you purchase a dental practice first and then buy your dream house a year or two later. By that time, you will have years of work experience and cash flow to secure a favorable mortgage loan.

Current Homeowners

If you already own a house, you are able to purchase a practice almost immediately assuming a few factors: First, you must have proper liquidity, and second, your mortgage payment must not be too large that your debt service ratio is too low for the bank to underwrite. With a mortgage payment locked in place, you are viewed as a riskier candidate for banks since they don’t know what your cash flow will be until you identify a prospective practice and present its financials. Your years as an associate will also be crucial to demonstrate production history and build up your savings.

Through strategic financial planning, dentists will be able to eventually buy both their dream practice and home. If you’re looking to buy a practice, check out our available listings and reach out to us for lender recommendations.