Leasing vs. Buying Dental Office Space: Decision-Making Guide

Leasing vs. Buying Dental Office

Uncertain about the pros and cons of leasing vs. buying dental office space? If you’re looking to expand, relocate, or open a dental clinic, you’re probably thinking about which option is the best decision for your practice.

You’re probably wondering about the financial implications of long-term stability, flexibility, and investment value. Choosing the wrong option can lead to increased costs, operational challenges, and missed growth opportunities.

In this article, we’ll discuss the pros and cons of leasing vs. buying dental office space so you can make informed decisions about your practice’s future.

Weighing the Pros and Cons of Leasing a Dental Office

Pros of Leasing a Dental Office

Flexibility

One of the primary benefits of leasing: flexibility. Lease terms are shorter (typically 10 years for healthcare practices) than a mortgage, which has no definite end date—so you can adapt more easily to changes in your practice or market conditions.

Flexibility is particularly beneficial if you’re uncertain about your practice’s long-term growth or if you need to relocate in the future.

Maintenance and Repairs

When you lease a dental office, the landlord is usually responsible for maintenance and repairs. While you need to discuss and negotiate for this benefit in your lease, it will save you considerable time and money.

Other Pros of Leasing

Cons of Leasing a Dental Office

Miss Investment Opportunities

Perhaps the most significant drawback of leasing: you miss out on potential investment opportunities. When you lease, you’re not building equity in a property over time, which may be a missed chance for long-term financial growth.

Rent Increases

Lease agreements typically include rent increases. Increases will be something you can negotiate when signing or renewing your dental lease. However, any rent hikes will impact your budget and financial planning.

Limited Control Over Your Space

As a tenant, you’ll have limited control over the space. You’ll be subject to the landlord’s rules and restrictions. You may not be able to sublease unused space or make certain modifications to suit your practice’s needs.

Long-Term Costs of Leasing

Over an extended period, the cumulative cost of leasing can add up and potentially exceed the cost of owning a comparable space. While leasing is cheaper in the short run (requires a smaller upfront commitment), you might end up paying more over time—especially if you stay in the same location for many years.

Other Cons of Leasing

  • Lack of long-term stability
  • Potential for lease termination
  • Limited customization options
  • Potential for difficult landlords

Weighing the Pros and Cons of Buying a Dental Office

Pros of Owning a Dental Office

Leasing Unused Space

One of the most significant advantages of owning your dental practice space is the potential to generate a steady income stream by leasing out unused space. If you have extra room in your building, you can rent it to other businesses, particularly healthcare practices, which is a niche market. Leasing unused space optimizes your property’s potential and provides a substantial supplementary revenue source to support your practice’s growth.

Appreciation Over Time

Another significant benefit is the potential for appreciation in value over time. Commercial real estate tends to appreciate in value over the long haul, allowing you to build equity—while contributing to your dental practice’s long-term wealth-building strategy.

Greater Control Over Your Space

Owning your dental office also gives you far greater control over the space. You can customize it to fit your specific needs and goals without needing a landlord’s permission.

Other Pros of Owning a Dental Office

  • Increased creditworthiness
  • Potential for tax deductions
  • Savings through equity building
  • Opportunity for future expansion
  • Enhanced practice image and branding
  • Fixed mortgage payments, predictable expenses

Cons of Owning a Dental Office

Substantial Down Payment

One of the most significant disadvantages: you’ll need to put down a substantial down payment when securing a loan to purchase the property. This can leave you cash-poor and may limit your ability to invest in other areas of your practice—although this is only a temporary drawback.

Paying Building Expenses

As a property owner, you will also be responsible for paying taxes on the entire building, as well as covering all capital and maintenance costs. Some of these maintenance costs include: utilities, insurance, and trash collection services—which can end up being costly.

Responsibility for Repairs

When you lease dental space, your landlord may cover some or all of your repairs and renovations. When you purchase a space, you’ll be solely responsible for all repairs and renovations.

You’ll also need to handle tasks like property maintenance and tenant relations, which can take time away from your primary focus on providing dental care.

Other Cons of Owning a Dental Office

  • Complexity of property management
  • Potential for property value fluctuations
  • Reduced flexibility if you decide to relocate
  • Potential for vacancy if you plan to rent out parts of your space

Leasing vs. Buying Dental Office Space: Which is Right for Your Practice?

When deciding between leasing vs. buying dental office space, consider your practice’s requirements and long-term objectives. Take the time to create a detailed breakdown of your immediate needs and future expansion plans.

Do you anticipate needing more space as your practice grows? Are you looking for a long-term home for your established practice?

Evaluate the pros and cons of leasing vs. buying dental office space and take into account each option’s financial and flexibility implications.

Keep in mind:

  • Leasing offers lower upfront costs and greater flexibility.
  • Buying provides long-term stability and equity-building potential.

The right choice depends on your specific circumstances and goals. Consult with a healthcare real estate professional to help you weigh your options and make an informed decision that sets your practice up for success.

Find Your Dream Dental Office with United Development Realty

Your location, building, and the terms of your lease or mortgage could make or break your practice’s success. The dental real estate brokers at United Development Realty have specialized knowledge and an extensive network to help you find the ideal space for your dental practice.

We’ll help you decide whether leasing or buying is better for your practice and leverage our extensive market knowledge to help you make informed decisions.

Take the First Step Towards Your Practice’s Success

Get in touch today. You can also call us at (240) 221-1976 for a risk-free consultation.

FAQ

What Factors Should Dentists Consider Regarding Location Flexibility?

  • When considering location flexibility, assess your long-term practice goals and the potential for market changes.

Leasing offers more flexibility to relocate, while buying a dental office provides stability but may limit future location options.

About Charles Peacock

Over the past 30 years, Charles has been involved in Maryland real estate sales & leasing, property management, real estate investment, and the construction industry. He is a licensed commercial real estate broker, specializing in the representation of both tenants and landlords, as well as medical and dental professionals. Charles has also represented several medical building owners.