Entry #15
A Look Inside: Purchasing Dental Real Estate
“The very best deals – are not always advertised on the market.” – Someone smart….
When I purchased the real estate in which I built out my dental practice, the space was never actually listed for sale. No ‘For Sale’ signs and no leads from brokers. The very best deals are not always advertised. With proper knowledge of the demographics and competitive analysis of the area — I knew the location in which I wanted to practice. So I drove the area….I came a across a great location; that seemed to be vacant. (The windows were covered with trash bags – pretty clear indicator).
It was obvious that the space was not currently being used for anything. And I wanted to use it. I started with a Google search on the ownership history of the location; it didn’t yield anything useful. Then I went to the local City Hall office to try and get an ownership history; from there I was able to get the name of the owner, but no contact information. But the name was a start in the right direction. After Googling the owner’s name — still no contact information. But his FAMILY MEMBER’S contact information was available online. My great wife had an idea, “You should call his mom.” That’s what I call taking a “Smart-Cut.”
So I called his mom. Success! I got through to the mother of the owner of the real estate and told her that I needed to speak to her son regarding a business matter relevant to his real estate. From there the rest is history – I was able to negotiate a very fair deal with him to acquire the property which ended up being the home to my start-up.
I was able to negotiate an excellent deal which priced the building significantly below what I would typically expect similar real estate to cost. I verified this by running the comps (comparable properties) in the area. I also negotiated favorable terms regarding completion of the build-out. Those who know my start-up story in detail know that the owner agreed to build the real estate to my specifications prior to the sale; at his cost. (Negotiate, Negotiate, Negotiate).
Achieving such a steal with the real estate dramatically aided me on my quest to a low overhead dental practice. A large monthly expense for many practices is the monthly rent. No rent. I do have a mortgage payment each month (building equity), however, that only comes to around $1,000 per month including the monthly interest payment.
In addition to low cost – prime location is critical to real estate selection. The stand-alone property which I purchased is located:
#1) In the center of a downtown area
#2) On ‘Main Street’
#3) At a 4-way intersection
Owning a stand-alone building in a highly visible location is something that I believe every dental practice owner would benefit from. If you want lots of new patients, visibility is important. It seems like some dentists are actively trying to hide from patients when they start-up camouflaged in some medical office suite camouflaged that can’t be seen from the main road. It gives me a headache when dentists think its a good idea to hide their practices from their patients. (They don’t ‘say’ they are hiding their practices — but if no one, or few people, can easily see your practice, or your signage when driving by…you’re hidden! Not good for business!)
No one will care more about tracking down a quality piece of real estate for you – than you. Realtors and developers for hire can sometimes do a fine job, but I recommended doing some major legwork yourself. Even so much as speaking with local business owners and community figures regarding potential sale of properties in the area you are targeting.
Every city is going to have particular building requirements that you should familiarize yourself with. Make sure you are well versed in these so that you are aware of architectural requirements, parking lot size regulations, water/sewer regulations, building size or building signage restrictions, and if there are any unique taxes which may apply to you. These are all things you need to know ahead of time. You do not want any surprises.
Once you have selected the property you are going to go after; you will likely need to have both a land survey completed and an Environmental Study (likely a Phase 1 environmental study) completed. The Title Company you are working with should be able to tell you exactly what types of studies and surveys are needed to analyze the property before a deal can be completed. These surveys and studies serve to obtain an accurate picture of the property and if there are any hidden facts, contaminants, or flaws pertaining to the property.
Of course, you will also need to have an appraisal done. The appraisal is going to determine the value of the property in the eyes of the bank. This assumes that you are financing the property and not paying cash for it. If you are paying cash for your property – you probably don’t need the appraisal and can determine a ‘fair deal’ with the seller based on market value alone. The appraisal is very critical – and hopefully lands somewhere near the agreed upon price you have come to terms on with the seller — otherwise you may be responsible for the difference in value. This can be 10’s of thousands of dollars. Also, please check the zoning of the property. You don’t want to close on a property to build your commercial dental office, only to realize the land is zoned for industrial or residential. Again —take your building plans to the city municipal department for review before closing on the property or investing too much money.
All said and done; the various surveys, studies, and appraisals which need to be completed prior to purchase can total to several thousand dollars. In your purchase agreement with the seller, you can negotiate the terms as far as who is to pay for what. (Negotiate, Negotiate, Negotiate). Please make sure you have your purchase agreement reviewed by an attorney prior to signing.
The more involved you are with the process of acquiring your property the better. You don’t want to leave this process up to chance.
Kaizen,
–DeAngelo S. Webster, DDS
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