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Hi, David Catalano here.
One of the general questions dentists ask me is, "Is leasing better than owning?"
The answer is usually, "It depends." It depends upon your unique situation. Here's a specific situation I was asked about and my advice:
DENTIST: I am in a situation where my existing dental practice building will be torn down within the next 2 years by my landlord. A building just became available approximately 4 blocks away. The price of the building is above the appraised value, but is in a much better (more visibility and traffic) location then my existing location. What should I do? Is leasing better than owning a building?
DAVID: In general, I would prefer to receive rents than pay them. Each situation needs to be analyzed individually. An office building is really two investments. The first is a real estate investment in the amount of the cost of the building (or the shell of the building). The second investment is in your dental practice. This investment will equal the cost of the improvements, equipment and technology that turns the building into your dental office.
RETURN ON INVESTMENT: Based on the supply and demand in your area, will the building (not including the improvements that make it a dental office) rise or fall in value over your holding period?
Will the investment in your practice (improvements, equipment and technology) have a positive return? To help you with this, a dental design firm that I know quotes a 40% increase in collections after the completion of a new office using their services based on their actual client surveys.
If you have to move anyway, the only analysis is that of the real estate investment. The buildout of the new office will require a similar investment whether you rent or lease. Depending on the building, renovating it may be more expensive than ground up construction or buying a condo shell.
Either way you go, you should attend a dental design seminar. Why? Because you don't know what you don't know. There is an 8-step process that everyone goes through BEFORE they begin to design their office. You are actually going through one step now when you contemplate the purchase of the building down the street. My point is that if you do not design dental offices for a living, you should at least attend a seminar by people that do.
From a financial standpoint, hire a professional to review your past, present and future financial situation. You want to contemplate your fears, your strengths and your opportunities all over a 3 - 10 year time horizon. This analysis will drive your choices. Your instinct will help you pick the right one.
For the best dental design conference go to www.thedesign.com. They hold them many times per year and have been doing it since 1986. I have many clients that utilize their services. DISCLAIMER: I speak at their conferences, so I am a bit biased towards them. However I am unequivocal about the need for their design conference for a dentist that may move his office.
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David Catalano Finance Geeks 9000 Keystone Crossing, Suite 630 Indianapolis, IN 46240 317-581-5664 Office, Extension 20 317-581-1812 Fax
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