Transitioning Both Your Dental Practice and Your Real Estate

Selling your dental practice is a significant milestone, but it’s only half the story. To ensure a smooth and profitable exit, it’s essential to plan for the transition of both your dental practice and your real estate, whether you lease or own your space.

If You Lease:

Review your lease terms early. Understand your assignment clause, remaining term, and renewal options. Work with a broker to prepare for assignment or renegotiation, as your lease directly impacts your practice’s value to buyers.

• Private Buyer: Will likely assume your lease. Their lender may require the lease to match the loan term.
• DSO: Typically prefers leasing. They seek long-term stability and favorable terms, and may require tenant improvements.
  

If You Own:

Decide if you’ll sell the building or lease it to the buyer. Selling your property allows for a full exit. Leasing it out means you retain ownership and generate passive income.

Get a real estate valuation separate from your practice valuation, and consult your accountant to understand capital gains and tax implications.

• Private Buyer: May or may not buy both assets, depending on purchasing power and interest. 
• DSO: May lease or buy the building, depending on their model.
  

You also have the option to sell your building to a third party as an investment sale. If you do this before your practice sale, you’ll receive the benefits of a sale-leaseback. You could also sign a lease with your buyer and then sell the building. This strategy enables you to maximize the value of your assets and then walk away entirely, but you’ll have the challenge of finding two buyers.

Benefits of Coordinating the Transition:

Coordinating the sale of your dental practice and real estate isn’t just convenient—it’s strategic. Here are some of the benefits of a coordinated transition:

• Maximize total value with aligned timing.
• Reduce complications by streamlining advisors and processes.
• Retain leverage by controlling both assets.
• Enable better tax planning with the right structure.
  

Who You Need on Your Team:

Successfully navigating a dental transition requires the right professionals by your side. Building a team with the right expertise ensures every detail, from contracts to tax planning, is covered.

• Dental transitions advisor
• Dental-specialized commercial real estate advisor
• CPA or tax advisor
• Attorney (for dental and real estate contracts)

Start planning for your transition three to five years in advance, especially if you own your real estate. By understanding how your practice value and real estate are connected, you will be able to make strategic decisions, especially with the right team by your side.

Menlo specializes in both practice sales and dental real estate. Contact us today at 480-290-7720 to discuss your exit plan.