Can you get a 1.5 million dollar dental practice loan?

[753698]

Just out of curiosity, will a bank ever lend you a 1.5 million dollar loan to purchase a dental practice. Suppose you wanted to purchase a 2 million dollar dental practice, how would you go about financing it?

I'm assuming they would like to see prior production totals to see that you can support the necessary cash flow, approx how much production per year would you need to show. It's unrealistic to show similar production to the selling dentist, since you won't be coming from a 2 million revenue practice yourself, but I assume you can show strong production (speed) by working in a corporate office for a year or 2, right?

Would they generally want a really experienced dentist, or would they be willing to loan to a relatively fresh dentist given he can show strong production?

This is all purely hypothetical. I've seen extremely large multi-specialty practices on the market, but I'm curious as to whether a single dentist can purchase such a practice or if it's corporations purchasing these practices.

Thanks

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[321931]

Just out of curiosity, will a bank ever lend you a 1.5 million dollar loan to purchase a dental practice. Suppose you wanted to purchase a 2 million dollar dental practice, how would you go about financing it?

I'm assuming they would like to see prior production totals to see that you can support the necessary cash flow, approx how much production per year would you need to show. It's unrealistic to show similar production to the selling dentist, since you won't be coming from a 2 million revenue practice yourself, but I assume you can show strong production (speed) by working in a corporate office for a year or 2, right?

Would they generally want a really experienced dentist, or would they be willing to loan to a relatively fresh dentist given he can show strong production?

This is all purely hypothetical. I've seen extremely large multi-specialty practices on the market, but I'm curious as to whether a single dentist can purchase such a practice or if it's corporations purchasing these practices.

Thanks

Yes you can

 

[753698]

Yes you can

Well that was concise haha.

Could you elaborate on what it would take to get such a loan. I know dental practice loans are typically low risk, but I would assuming most banks would hesitate before lending someone 1.5 million dollars.

 

[321931]

Well that was concise haha.

Could you elaborate on what it would take to get such a loan. I know dental practice loans are typically low risk, but I would assuming most banks would hesitate before lending someone 1.5 million dollars.

How much you can produce, how much debt you have, how much assets you have. If you have big student loans and 1-2 years out most likely no.

 

[753698]

How much you can produce, how much debt you have, how much assets you have. If you have big student loans and 1-2 years out most likely no.

I heard they also put heavy weight on credit score, is this accurate?

Also, suppose you graduate school with little to no debt. Then is the #1 priority getting up your credit score/producing massively at your associate position? How are you even supposed to produce so much dentistry as an associate, would you recommend finding a rural practice with an absentee owner so you can do all the dentistry in said office?

 

[321931]

I heard they also put heavy weight on credit score, is this accurate?

Also, suppose you graduate school with little to no debt. Then is the #1 priority getting up your credit score/producing massively at your associate position? How are you even supposed to produce so much dentistry as an associate, would you recommend finding a rural practice with an absentee owner so you can do all the dentistry in said office?

Not really. Credit score as long as you aren't defaulting on your cards...bankrupt...you are fine.

Associate? Where there is a will there is a way. Noone will give you freebies in life. You go where you are needed and work hard to get what you get. Some associates gonna make 100k starting out, and some will have opportunity to make 200k. It's all up to you.

 

[Munks]

Well that was concise haha.

Could you elaborate on what it would take to get such a loan. I know dental practice loans are typically low risk, but I would assuming most banks would hesitate before lending someone 1.5 million dollars.

You would think so, but prior to all this student loan bubble (and maybe even now but I don't have current data), dental practice loans were one of the lowest risk investments for banks.. something like a 1% loan default rate, even lower than a mortgage. But yes, while they are willing and able, most of the bank advisers that have come speak in our residency have said that they ideally would want to see 1-2 years of good production to know that you are capable of taking over. Who knows how strict they really are. And yeah there's student loans in the mix now too.

 

[753698]

You would think so, but prior to all this student loan bubble (and maybe even now but I don't have current data), dental practice loans were one of the lowest risk investments for banks.. something like a 1% loan default rate, even lower than a mortgage. But yes, while they are willing and able, most of the bank advisers that have come speak in our residency have said that they ideally would want to see 1-2 years of good production to know that you are capable of taking over. Who knows how strict they really are. And yeah there's student loans in the mix now too.

Yeah that makes sense, they gotta make sure you are fast enough to keep on pace with selling dentist. But how would a non-dentist (banker) judge your production anyway? For example, an associate will never match the production of the selling dentist of a $ 2 MM practice, no matter how good the associate is. Their speed could be incredibly fast, but they won't see the volume of patients as a private practice owner dentist. Would a lender take this into consideration?

Not really. Credit score as long as you aren't defaulting on your cards...bankrupt...you are fine.

Associate? Where there is a will there is a way. Noone will give you freebies in life. You go where you are needed and work hard to get what you get. Some associates gonna make 100k starting out, and some will have opportunity to make 200k. It's all up to you.

What do you think of working at a corporation for 1-2 years instead of associateship? Are there more opportunities for higher production? Also, I heard many corporate dental chains sponsor CE courses for their dentists, could this be useful for a new grad looking to gain skills in specialty procedures? I would assume if you are buying a large dental practice that produces in the millions, you better be well versed in all specialty procedures (endo, implants, extractions etc.)

 

[charlestweed]

A year after graduation, my wife and I had accumulated close to 1 mil in debt: $450k student loan + $380k home loan + $30k car loan (that was a stupid decision to buy a used BMW). My wife and I had very good stable incomes from our associate jobs. But when we tried to apply for a loan to buy a $5k TV (yes, a good TV used to cost that much in the early 2000s), we got denied and my father -in-law had to cosigned the loan. When we applied for a business loan to purchase a $92k existing perio practice at Bank of America, we also got denied. We had to get a loan from a smaller no name bank that charged higher interest rate....and it was a balloon loan. That was 15+ years ago way before the housing bubble crisis. I think it's probably more difficult to obtain a loan now.

 

[321931]

Yeah that makes sense, they gotta make sure you are fast enough to keep on pace with selling dentist. But how would a non-dentist (banker) judge your production anyway? For example, an associate will never match the production of the selling dentist of a $ 2 MM practice, no matter how good the associate is. Their speed could be incredibly fast, but they won't see the volume of patients as a private practice owner dentist. Would a lender take this into consideration?



What do you think of working at a corporation for 1-2 years instead of associateship? Are there more opportunities for higher production? Also, I heard many corporate dental chains sponsor CE courses for their dentists, could this be useful for a new grad looking to gain skills in specialty procedures? I would assume if you are buying a large dental practice that produces in the millions, you better be well versed in all specialty procedures (endo, implants, extractions etc.)

There are many big collecting practices that do no endo, os or endo. That is a big big big myth. Best advice is get your basics down, get people skills down, and do your due diligence when purchasing a practice. Work 1-2 years and then find a practice that fits your practice style

 

[321931]

A year after graduation, my wife and I had accumulated close to 1 mil in debt: $450k student loan + $380k home loan + $30k car loan (that was a stupid decision to buy a used BMW). My wife and I had very good stable incomes from our associate jobs. But when we tried to apply for a loan to buy a $5k TV (yes, a good TV used to cost that much in the early 2000s), we got denied and my father -in-law had to cosigned the loan. When we applied for a business loan to purchase a $92k existing perio practice at Bank of America, we also got denied. We had to get a loan from a smaller no name bank that charged higher interest rate....and it was a balloon loan. That was 15+ years ago way before the housing bubble crisis. I think it's probably more difficult to obtain a loan now.

I think it’s way harder back then to get a dental business loan back when you graduated. I know plenty of in debt dentists that range from 0 to 500k that easily got loans from the bank. However a 1 mil+ practice would be a stretch. 700k would be more reasonable. Banks have different criteria’s that fit their safety net.

 

[753698]

A year after graduation, my wife and I had accumulated close to 1 mil in debt: $450k student loan + $380k home loan + $30k car loan (that was a stupid decision to buy a used BMW). My wife and I had very good stable incomes from our associate jobs. But when we tried to apply for a loan to buy a $5k TV (yes, a good TV used to cost that much in the early 2000s), we got denied and my father -in-law had to cosigned the loan. When we applied for a business loan to purchase a $92k existing perio practice at Bank of America, we also got denied. We had to get a loan from a smaller no name bank that charged higher interest rate....and it was a balloon loan. That was 15+ years ago way before the housing bubble crisis. I think it's probably more difficult to obtain a loan now.

Luckily I shouldn't be almost 1 million in debt. I might have some debt from school, maybe 100k at most, but I probably won't buy a house till after I buy my practice. Not looking to start a family either, if that even matters for banks, so expenses should be relatively low.

Just out of curiosity, if you are an orthodontist, why were you looking to purchase a periodontal practice? It's still crazy you couldn't get a 92k loan, from what I've read banks will lend almost up to 300k to new grads who haven't even practiced at all, so for someone who practices as an orthodontist to not be able to get a 92k loan is crazy.

There are many big collecting practices that do no endo, os or endo. That is a big big big myth. Best advice is get your basics down, get people skills down, and do your due diligence when purchasing a practice. Work 1-2 years and then find a practice that fits your practice style

Hmm, that's interesting. How will a practice even achieve big collections without doing many specialty procedures? Relatively speaking, fillings etc. are rather low profit compared to a root canal or extraction or implant. From looking at dental procedure costs, it seems that a crown and some cosmetic procedures are the only high profit non-specialty procedures. Does that mean a high producing office does a bunch of crowns and cosmetics?

think it’s way harder back then to get a dental business loan back when you graduated. I know plenty of in debt dentists that range from 0 to 500k that easily got loans from the bank. However a 1 mil+ practice would be a stretch. 700k would be more reasonable. Banks have different criteria’s that fit their safety net.

Do you think that it will continue to get easier or will it now get harder to get loans since many dentists are heavily in debt?

 

[321931]

No I don’t do any cosmetic cases. There are many ways to practice. PPO mill see 40 patients a day collecting 1 million doing fill and drill. Cosmetic practice sees 2-3 patients a day collecting 1 million. Big do everything office seeing 20 or so patients doing endo and os and placing implants. Business isn’t cookie cutter. You need to think outside the box and see there are different ways to obtaining a high collection practice.

I think it will be harder in a sense the bank will lend you money but you will overpay for your practices. A practice needs to service the practice loan and your student loans. A lot of people graduating with big debt and not a lot of big collecting practices for sale. If a good one goes for sale that just does bread and butter dentistry and can service your loans and student loans while also having a 4 day work week... I bet there will be tons of bidders vying for the practice. So you will overpay.

Either way not a great position to be in... but what’s done is done. Good luck!

 

[charlestweed]

Luckily I shouldn't be almost 1 million in debt. I might have some debt from school, maybe 100k at most, but I probably won't buy a house till after I buy my practice. Not looking to start a family either, if that even matters for banks, so expenses should be relatively low.

Just out of curiosity, if you are an orthodontist, why were you looking to purchase a periodontal practice? It's still crazy you couldn't get a 92k loan, from what I've read banks will lend almost up to 300k to new grads who haven't even practiced at all, so for someone who practices as an orthodontist to not be able to get a 92k loan is crazy.

I forgot to include the $50k credit card debt (ortho residency didn’t give me enough loan to live). Even though we made on time payments (for some of them, we even paid more than the required minimum) for all of our loans, the banks still considered us high risk borrowers. That’s because the overall debt amount was so high. The only thing that was easy to get an approval was when I leased a car.

Thanks to the appreciation of our home values, we were able to use the profit that we earned from selling our 2 houses to pay off the $450k student loan debt in 5 years.

 

[321931]

No I don’t do any cosmetic cases. There are many ways to practice. PPO mill see 40 patients a day collecting 1 million doing fill and drill. Cosmetic practice sees 2-3 patients a day collecting 1 million. Big do everything office seeing 20 or so patients doing endo and os and placing implants. Business isn’t cookie cutter. You need to think outside the box and see there are different ways to obtaining a high collection practice.

I think it will be harder in a sense the bank will lend you money but you will overpay for your practices. A practice needs to service the practice loan and your student loans. A lot of people graduating with big debt and not a lot of big collecting practices for sale. If a good one goes for sale that just does bread and butter dentistry and can service your loans and student loans while also having a 4 day work week... I bet there will be tons of bidders vying for the practice. So you will overpay.

Either way not a great position to be in... but what’s done is done. Good luck!

One final thing on big collection practices. It’s not about how much you collect but rather your overhead and take home. There are 500-700k offices on 50% overhead that make more takehome, work less, have less stress then a 1 mil+ with 70% overhead

 

[753698]

No I don’t do any cosmetic cases. There are many ways to practice. PPO mill see 40 patients a day collecting 1 million doing fill and drill. Cosmetic practice sees 2-3 patients a day collecting 1 million. Big do everything office seeing 20 or so patients doing endo and os and placing implants. Business isn’t cookie cutter. You need to think outside the box and see there are different ways to obtaining a high collection practice.

I think it will be harder in a sense the bank will lend you money but you will overpay for your practices. A practice needs to service the practice loan and your student loans. A lot of people graduating with big debt and not a lot of big collecting practices for sale. If a good one goes for sale that just does bread and butter dentistry and can service your loans and student loans while also having a 4 day work week... I bet there will be tons of bidders vying for the practice. So you will overpay.

Either way not a great position to be in... but what’s done is done. Good luck!

Yeah unfortunately I've seen that, most attractive practices are selling for 75-85% of their collections, which is relatively high. I've read it's supposed to be closer to 60-70% of past years collections. I think it might be because dentistry itself is also becoming tougher, since there are too many dentists and not enough cavities. Any path to get a solid patient base will probably be sought after by many dentists.

Do you think any future advancements in preventing tooth decay will further diminish returns in our profession? I'm guessing fluoride itself probably reduced many dentists production by a large margin, who knows what else will be discovered.

I forgot to include the $50k credit card debt (ortho residency didn’t give me enough loan to live). Even though we made on time payments (for some of them, we even paid more than the required minimum) for all of our loans, the banks still considered us high risk borrowers. That’s because the overall debt amount was so high. The only thing that was easy to get an approval was when I leased a car.

Thanks to the appreciation of our home values, we were able to use the profit that we earned from selling our 2 houses to pay off the $450k student loan debt in 5 years.

Would you say it's easier to get financing now that you are an established dentist? What are some things you would have done differently if you could go back in time? Maybe hold off on the house and pay back loans and purchase a practice first?

One final thing on big collection practices. It’s not about how much you collect but rather your overhead and take home. There are 500-700k offices on 50% overhead that make more takehome, work less, have less stress then a 1 mil+ with 70% overhead

Yeah I've noticed that. It's important to look at the net income of the dentist. I've seen practices listed that collect 1.5 Mil, but the dentist only takes home 400k. That's fine if you got your loans paid off, but for a buyer that's a nightmare. After tax and the almost 200k loan payment on the practice, there is barely any money left over for living expenses. Then on the flip side I have seen practices listed where the collections are 800k, and the net income is 400k, which is an absolute steal. However a 50% overhead practice is very rare and high in demand so the price tag will also be very high.

 

[321931]

Yeah unfortunately I've seen that, most attractive practices are selling for 75-85% of their collections, which is relatively high. I've read it's supposed to be closer to 60-70% of past years collections. I think it might be because dentistry itself is also becoming tougher, since there are too many dentists and not enough cavities. Any path to get a solid patient base will probably be sought after by many dentists.

Do you think any future advancements in preventing tooth decay will further diminish returns in our profession? I'm guessing fluoride itself probably reduced many dentists production by a large margin, who knows what else will be discovered.



Would you say it's easier to get financing now that you are an established dentist? What are some things you would have done differently if you could go back in time? Maybe hold off on the house and pay back loans and purchase a practice first?



Yeah I've noticed that. It's important to look at the net income of the dentist. I've seen practices listed that collect 1.5 Mil, but the dentist only takes home 400k. That's fine if you got your loans paid off, but for a buyer that's a nightmare. After tax and the almost 200k loan payment on the practice, there is barely any money left over for living expenses. Then on the flip side I have seen practices listed where the collections are 800k, and the net income is 400k, which is an absolute steal. However a 50% overhead practice is very rare and high in demand so the price tag will also be very high.

Hey someone that sees the reality of dentistry... and another reason why....

I think dentistry is good for now, but will be trending downwards in the future. There’s a lot of cheerleaders on the forum that think otherwise and think that it will always be roses but reality is debt going higher, more dentists being pumped out, less lucrative practices, more insurance control and cutback on reimbursement and more competition from corporate really makes dentistry not the most lucrative job as it used to be.

The days of hang a shingle and put your name in yellowbooks and make 500k is long gone. It’s more like free tvs and whitening and leave us yelp review and do dancing videos on instagram... to get some crappy PPO patient is the norm and will continue to get worse. Ortho imo will be gutted by algn and diy braces. People don’t care about occlusion but rather their front teeth at half the cost of an orthodontist. Endo omfs pedo always a need though.

 

[753698]

Hey someone that sees the reality of dentistry... and another reason why....

I think dentistry is good for now, but will be trending downwards in the future. There’s a lot of cheerleaders on the forum that think otherwise and think that it will always be roses but reality is debt going higher, more dentists being pumped out, less lucrative practices, more insurance control and cutback on reimbursement and more competition from corporate really makes dentistry not the most lucrative job as it used to be.

The days of hang a shingle and put your name in yellowbooks and make 500k is long gone. It’s more like free tvs and whitening and leave us yelp review and do dancing videos on instagram... to get some crappy PPO patient is the norm and will continue to get worse. Ortho imo will be gutted by algn and diy braces. People don’t care about occlusion but rather their front teeth at half the cost of an orthodontist. Endo omfs pedo always a need though.

Competition will definitely make things tough, but I live for competition. And in some ways, I am fortunate because I feel I am entering dentistry at the right time to jump on the group practice bandwagon. Solo practice is definitely dying due to competition, and since dentistry is going the way of medicine, group practices will become the new norm in the private side. Corporate will continue to grow, and eventually it will probably be a 50/50 split between corporate and private like it is in medicine. I feel like an ambitious business minded dentist can take advantage of the changing landscape by establishing a group practice himself, and when a high volume of dentists are being churned out from D school, the owner dentist will always have a steady stream of associates/possible partnerships for his group practice.

Imagine though, if there are advancements made in the field of dentistry (or anti advancements in the dentists case) where the instances of cavities/any other tooth decay are lessened even more, or maybe something that significantly strengthens the dentin like fluoride strengthens the enamel, then even specialties like Endo will go down significantly. Less cavities will be able to reach the nerve with stronger dentin, means less root canals means less production. Obviously it won't just hurt Endo, but every field. This is what I'm most scared of for the future. But then again, this can be said of any profession. With the oncoming advancements in AI many professions will become obsolete. I'm hoping I can jump into dentistry and build a solid exit strategy for whenever the profession dies, because unfortunately it is probably inevitable.

 

[2TH MVR]

A few thoughts. One is that is a lot of $$$ to pay for a practice.
Two. ALL banks will ask for a personal guarantee from you and your spouse. So if you think having a PC, LTD corporate entity to protect you .... you won't. YOU will be PERSONALLY responsible for the debt. Three. For 1.5mill .... I hope there is real estate attached to a deal this size. If you have Real Estate/building .... you have a tangible asset that is worth something. Banks would rather loan on a tangible asset.

It's like everything in life. The stronger your financials ... the lower your interest rates are. In time with history with a bank and strong financials .... you will be able to get the BEST rates.

 

[321931]

A few thoughts. One is that is a lot of $$$ to pay for a practice.
Two. ALL banks will ask for a personal guarantee from you and your spouse. So if you think having a PC, LTD corporate entity to protect you .... you won't. YOU will be PERSONALLY responsible for the debt. Three. For 1.5mill .... I hope there is real estate attached to a deal this size. If you have Real Estate/building .... you have a tangible asset that is worth something. Banks would rather loan on a tangible asset.

It's like everything in life. The stronger your financials ... the lower your interest rates are. In time with history with a bank and strong financials .... you will be able to get the BEST rates.

Leases ask for guarantee. Depending on finances and what you have personal guarantee required.

 

[Cold Front]

Just out of curiosity, will a bank ever lend you a 1.5 million dollar loan to purchase a dental practice. Suppose you wanted to purchase a 2 million dollar dental practice, how would you go about financing it?

I'm assuming they would like to see prior production totals to see that you can support the necessary cash flow, approx how much production per year would you need to show. It's unrealistic to show similar production to the selling dentist, since you won't be coming from a 2 million revenue practice yourself, but I assume you can show strong production (speed) by working in a corporate office for a year or 2, right?

Would they generally want a really experienced dentist, or would they be willing to loan to a relatively fresh dentist given he can show strong production?

This is all purely hypothetical. I've seen extremely large multi-specialty practices on the market, but I'm curious as to whether a single dentist can purchase such a practice or if it's corporations purchasing these practices.

Thanks

Yes, if the numbers make sense to the banks. Not all banks are the same. Getting a loan for a dental business is not exact science, but an art.

Banks love dentists, because almost all dentists pay their bills on time. The default rate for dental loans are also one of the lowest in any kind of business.

Banks primarily look at when you graduated first, your credit, your income to debt ratio, the practice you are trying to build or purchase (how many employees, how many chairs, what kind of insurances), your production numbers, and so on. All these details add up to a picture, and that picture is what underwriters look at. If they don’t like the red flags or the art aspect of it, you will be denied.

I applied for a Start-up practice loan within days after I graduated from dental schools. The first 4 banks denied me, I didn’t stop there, and I finally got approval from Wells Fargo bank. The contingency to the loan was that I have a part-time job that paid certain income to get a $200k loan. I learned from the first 4 denied applications on how banks think, then changed my strategy to get the loan on my 5th try.

Today, I wouldn’t apply for a credit card, or auto loan, or mortgage, or a commercial loan if I would see the underwriters at the bank being picky about something on my application. Once you understand how the system works, you can get any loans at a reasonable amount without a worry. I remember when I purchased my commercial buildings for $5M (today they are worth lot more), a red flag that came up in my application was my age (early 30’s). Because banks don’t typically see early 30’s applicants every day when they review applications for mid-cap level loans ($2-5M range). The bank couldn’t deny me by age alone, that would technically be a discrimination, so they looked for something else and they couldn’t find it - so I was approved.

I’m not encouraging anyone to test banks to get any money, but it’s far more important to understand what you are getting yourself into. If you default, you may never get a chance to get a loan again for a decade or even longer. So apply for a business loan responsibly.

 

[DrJeff]

A few thoughts. One is that is a lot of $$$ to pay for a practice.
Two. ALL banks will ask for a personal guarantee from you and your spouse. So if you think having a PC, LTD corporate entity to protect you .... you won't. YOU will be PERSONALLY responsible for the debt. Three. For 1.5mill .... I hope there is real estate attached to a deal this size. If you have Real Estate/building .... you have a tangible asset that is worth something. Banks would rather loan on a tangible asset.

It's like everything in life. The stronger your financials ... the lower your interest rates are. In time with history with a bank and strong financials .... you will be able to get the BEST rates.

Agree wholeheartedly with this!!

If the deal is at 1.5 million, that better be a practice that is doing roughly 2.5 to 3 times that, or that number should be based on say 2/3rds or so real estate and 1/3rd practice. The "goodwill" side of practice valuation, in spite of what many a dentist who worked long and hard to get a practice to where it is when they look to sell, is far from a 1:1 (production the past year ='s goodwill value)

The reality is what a practice did the year or few years before one looks to buy/sell it, is mainly past news, and not necessarily an indicator of what it will do in the future

 

[charlestweed]

Would you say it's easier to get financing now that you are an established dentist? What are some things you would have done differently if you could go back in time? Maybe hold off on the house and pay back loans and purchase a practice first?

Yes, after my wife and I paid off the student loans, our credit scores climbed up to the 800 range. And then the housing market crashed. We took this opportunity to take out more loans to buy a couple of investment properties at low prices. During this housing crisis, the banks were very strict but we had no problem getting the loans approved.

Buying a house vs buying a practice first? I don’t know. It’s up to you. There is really no right or wrong way. I chose to buy a house first because I felt I had suffered (growing up poor, minimum wage jobs, long schooling etc) long enough and I wanted to reward myself. Luckily, the profit we earned from selling our 2 houses helped us pay off the student loan…we essentially lived in our house for free.

Another reason why I didn’t start a practice right away was my associate income was very good. I was afraid that if I opened a practice and failed, I would lose the lifestyle I enjoyed. It took me 4 years to finally have the courage to start my first office. I borrowed $75k from the bank and used $55k from my saving to build an office from scratch. Now looking back, it wasn’t too difficult to start an office. That’s because the overhead was so low and I still kept my associate job (I worked at my own office on Saturdays and Sundays). I didn't have to downgrade the lifestyle. 2-3 new cases a month were all I needed to break even.

 

[753698]

A few thoughts. One is that is a lot of $$$ to pay for a practice.
Two. ALL banks will ask for a personal guarantee from you and your spouse. So if you think having a PC, LTD corporate entity to protect you .... you won't. YOU will be PERSONALLY responsible for the debt. Three. For 1.5mill .... I hope there is real estate attached to a deal this size. If you have Real Estate/building .... you have a tangible asset that is worth something. Banks would rather loan on a tangible asset.

It's like everything in life. The stronger your financials ... the lower your interest rates are. In time with history with a bank and strong financials .... you will be able to get the BEST rates.

Yes that is a lot of money for a practice, but my line of thinking was that since dentistry is already becoming very competitive, it would be best to buy into an established, loyal patient base. I'm guessing start-ups are only going to get harder, and so is buying a small practice and growing it. I would assume that buying a large practice and then continuing to market and expand upon the already large patient base will probably be the 'safer' strategy, even though it's tough to consider a $1 MM loan safe.

Also, how many dentists actually have tangible assets when borrowing? I'm guessing most dentists when first borrowing have pretty much no assets to their name. Most probably don't have any real estate. They probably have a car, maybe some savings, but that's about it.

Can you actually deduct the real estate of your dental practice as a business expense? For example, normally the lease is a significant part of the overhead of a practice. Now instead of a lease, can you make that a mortgage for your practice and have it included in the overhead also? In that case you would also have the real estate. However, this price would be separate than the dental practice purchase price, but it still gives you a tangible asset rather than a lease, right?

 

[753698]

Yes, if the numbers make sense to the banks. Not all banks are the same. Getting a loan for a dental business is not exact science, but an art.

Banks love dentists, because almost all dentists pay their bills on time. The default rate for dental loans are also one of the lowest in any kind of business.

Banks primarily look at when you graduated first, your credit, your income to debt ratio, the practice you are trying to build or purchase (how many employees, how many chairs, what kind of insurances), your production numbers, and so on. All these details add up to a picture, and that picture is what underwriters look at. If they don’t like the red flags or the art aspect of it, you will be denied.

I applied for a Start-up practice loan within days after I graduated from dental schools. The first 4 banks denied me, I didn’t stop there, and I finally got approval from Wells Fargo bank. The contingency to the loan was that I have a part-time job that paid certain income to get a $200k loan. I learned from the first 4 denied applications on how banks think, then changed my strategy to get the loan on my 5th try.

Today, I wouldn’t apply for a credit card, or auto loan, or mortgage, or a commercial loan if I would see the underwriters at the bank being picky about something on my application. Once you understand how the system works, you can get any loans at a reasonable amount without a worry. I remember when I purchased my commercial buildings for $5M (today they are worth lot more), a red flag that came up in my application was my age (early 30’s). Because banks don’t typically see early 30’s applicants every day when they review applications for mid-cap level loans ($2-5M range). The bank couldn’t deny me by age alone, that would technically be a discrimination, so they looked for something else and they couldn’t find it - so I was approved.

I’m not encouraging anyone to test banks to get any money, but it’s far more important to understand what you are getting yourself into. If you default, you may never get a chance to get a loan again for a decade or even longer. So apply for a business loan responsibly.

That's very interesting. If you do have the time, could you elaborate more on the systems/strategy for acquiring a loan? What are some possible red flags that can show up, other than the obvious (having bad credit score, high debt etc.) I've heard from other sources that the practice you are purchasing is the #1 source they look at, because they want to ensure that the cash flow from that practice can support such a loan. But obviously they gotta examine the buyer to make sure he's responsible with money.

Kudos to you on the commercial property, dentistry is a great field to provide income for other side investments!

 

[753698]

Agree wholeheartedly with this!!

If the deal is at 1.5 million, that better be a practice that is doing roughly 2.5 to 3 times that, or that number should be based on say 2/3rds or so real estate and 1/3rd practice. The "goodwill" side of practice valuation, in spite of what many a dentist who worked long and hard to get a practice to where it is when they look to sell, is far from a 1:1 (production the past year ='s goodwill value)

The reality is what a practice did the year or few years before one looks to buy/sell it, is mainly past news, and not necessarily an indicator of what it will do in the future

That's odd, most practices I have seen on broker sites are listed for around 75% of the last years production (most practices are on an upwards trend in production), but they usually don't include any real estate. Would you say this is a huge overpay, or am I missing something?

 

[doc toothache]

Agree wholeheartedly with this!!
If the deal is at 1.5 million, that better be a practice that is doing roughly 2.5 to 3 times that, or that number should be based on say 2/3rds or so real estate and 1/3rd practice. The "goodwill" side of practice valuation, in spite of what many a dentist who worked long and hard to get a practice to where it is when they look to sell, is far from a 1:1 (production the past year ='s goodwill value)The reality is what a practice did the year or few years before one looks to buy/sell it, is mainly past news, and not necessarily an indicator of what it will do in the future

It might hard to find anyone willing to sell a practice at 30% of the gross production.

 

[2TH MVR]

Yes that is a lot of money for a practice, but my line of thinking was that since dentistry is already becoming very competitive, it would be best to buy into an established, loyal patient base. I'm guessing start-ups are only going to get harder, and so is buying a small practice and growing it. I would assume that buying a large practice and then continuing to market and expand upon the already large patient base will probably be the 'safer' strategy, even though it's tough to consider a $1 MM loan safe.

Also, how many dentists actually have tangible assets when borrowing? I'm guessing most dentists when first borrowing have pretty much no assets to their name. Most probably don't have any real estate. They probably have a car, maybe some savings, but that's about it.

Can you actually deduct the real estate of your dental practice as a business expense? For example, normally the lease is a significant part of the overhead of a practice. Now instead of a lease, can you make that a mortgage for your practice and have it included in the overhead also? In that case you would also have the real estate. However, this price would be separate than the dental practice purchase price, but it still gives you a tangible asset rather than a lease, right?

You would set up a separate LLC for the Real Estate. When it came time to sell my practice ... The practice and the Real Estate were two different entities. I sold the practice, but kept the Real Estate as an investment. As always ..... Best to consult your accountant.

 

[2TH MVR]

That's odd, most practices I have seen on broker sites are listed for around 75% of the last years production (most practices are on an upwards trend in production), but they usually don't include any real estate. Would you say this is a huge overpay, or am I missing something?

I would rather buy an inexpensive practice with a downward trend if the down trend is because of the old dentist (like me , poor marketing, poor dental skills, poor practice management, under utilized, etc etc . The practice must be located in a decent area. A young, energetic dentist could turn this practice around.

 

[753698]

I would rather buy an inexpensive practice with a downward trend if the down trend is because of the old dentist (like me , poor marketing, poor dental skills, poor practice management, under utilized, etc etc . The practice must be located in a decent area. A young, energetic dentist could turn this practice around.

That's true, but I was thinking of doing such with any expansion practices. Once I have my large practice, I should have the means to purchase more smaller practices in hopes of turning them into highly profitable practices. This is generally a path entrepreneurial dentists follow (or so I've read). You can buy a practice like this for relatively cheap, maybe a practice where the previous owner was only working 2 days per week, referring out all specialty, no marketing etc. and then grow that practice to make it profitable by expanding to 5 doctor days a week (possibly with an associate dentist), strong marketing, doing specialty procedures. I'm sure you could take a practice previously doing 300-400k in production to one doing 700k+ within a year or two if done right. Theoretically you could do this with your first practice also, but I would just feel safer with a larger established patient base, even if it comes at a cost of my overall net income after loans.

You would set up a separate LLC for the Real Estate.

If you did this, would you still be able to deduct the entire mortgage payment as a business expense? From what I understand, the entire lease/rent payment is deductible as a business expense therefore it is a part of overhead, but do the same rules apply if you purchase the real estate for the practice? If this were the case, why would anyone lease the property and not just purchase it?

 

[2TH MVR]

If you did this, would you still be able to deduct the entire mortgage payment as a business expense? From what I understand, the entire lease/rent payment is deductible as a business expense therefore it is a part of overhead, but do the same rules apply if you purchase the real estate for the practice? If this were the case, why would anyone lease the property and not just purchase it?

The idea of separating the two assets (Real Estate and practice) is another layer of protection. You have two separate corporate entities. Your Real Estate (building/office) and the practice. My practice paid lease payments (deductible) to my .................... Properties, LLC. The LLC paid the mortgage on the property. Just another layer of protection.

The buyer of my practice wanted to buy my commercial building (office condo) and build out. I did not want to complicate the negotiations on the practice so I kept the Real Estate. The practice buyer bought my practice and that person has the 1st right of refusal when I am ready to sell the Real Estate. I earn income from the buyer's lease payments. When I am ready to sell the Real Estate (in a few years with 4-5 years remaining on the lease) .... I will get a best offer and he will have to match that offer to buy the building. The time to sell my property is when there is still 4-5 years of lease remaining on the property. The property is worth the most with a good lessee in place. If I wait till the end of the lease (7 years) the buyer will play hardball with me on the negotiations for BOTH the lease renewal and buying the property. I don't want to be in that position.

 

[753698]

The idea of separating the two assets (Real Estate and practice) is another layer of protection. You have two separate corporate entities. Your Real Estate (building/office) and the practice. My practice paid lease payments (deductible) to my .................... Properties, LLC. The LLC paid the mortgage on the property. Just another layer of protection.

The buyer of my practice wanted to buy my commercial building (office condo) and build out. I did not want to complicate the negotiations on the practice so I kept the Real Estate. The practice buyer bought my practice and that person has the 1st right of refusal when I am ready to sell the Real Estate. I earn income from the buyer's lease payments. When I am ready to sell the Real Estate (in a few years with 4-5 years remaining on the lease) .... I will get a best offer and he will have to match that offer to buy the building. The time to sell my property is when there is still 4-5 years of lease remaining on the property. The property is worth the most with a good lessee in place. If I wait till the end of the lease (7 years) the buyer will play hardball with me on the negotiations for BOTH the lease renewal and buying the property. I don't want to be in that position.

Very nice insight! Thank you very much.

It seems that the best way to purchase a practice is to buy the practice and the real estate (as long as the seller is willing to sell the real estate) because then once you are done paying the mortgage (lease) you won't have to continue paying a lease and your overhead will drop.

Would getting a loan for the real estate be diffiicult or should it be relatively easy since the production from the practice will cover the payments? Also, in your experience, is the mortgage generally a higher monthly payment (since there's interest, property tax etc.) than if you were just leasing the space?

 

[2TH MVR]

Very nice insight! Thank you very much.

It seems that the best way to purchase a practice is to buy the practice and the real estate (as long as the seller is willing to sell the real estate) because then once you are done paying the mortgage (lease) you won't have to continue paying a lease and your overhead will drop.

Would getting a loan for the real estate be diffiicult or should it be relatively easy since the production from the practice will cover the payments? Also, in your experience, is the mortgage generally a higher monthly payment (since there's interest, property tax etc.) than if you were just leasing the space?

It's better to own your property IMO. You control your loan payments by the type of loan you get. The loan payments will be a constant for 15-20 years (Typical loan amortization for commercial real estate). Each payment is going towards equity in your property.

With most leases ..... you are paying triple net (prop taxes for the owner, rent tax if applicable, management fees, insurance, CAMs, etc.). No equity in lease payments. The biggie is that depending how your lease is written .... the lease typically goes UP every year. Every year. Retail type leases are expensive. Your A/C unit dies .... YOU pay for a new one. Your CAM fees revolve maintenance for a building/parking lot for the long term benefit of the owner. Not you.

As for the amount of loan payments .... well that depends on how much you owe on the property.

Banks like tangible assets (building, equipment, supplies, furniture, etc.) to place leins on. Can't place a lein on future production/collections.

 

[Cold Front]

It's better to own your property IMO. You control your loan payments by the type of loan you get. The loan payments will be a constant for 15-20 years (Typical loan amortization for commercial real estate). Each payment is going towards equity in your property.

With most leases ..... you are paying triple net (prop taxes for the owner, rent tax if applicable, management fees, insurance, CAMs, etc.). No equity in lease payments. The biggie is that depending how your lease is written .... the lease typically goes UP every year. Every year. Retail type leases are expensive. Your A/C unit dies .... YOU pay for a new one. Your CAM fees revolve maintenance for a building/parking lot for the long term benefit of the owner. Not you.

As for the amount of loan payments .... well that depends on how much you owe on the property.

Banks like tangible assets (building, equipment, supplies, furniture, etc.) to place leins on. Can't place a lein on future production/collections.

You basically summarized my businesses in your last 2 posts. You are very well versed in this. Do you own your own buildings?

Between my buildings, I have ave a total of 7 tenants (including my 2 practices, the other 5 are national tenants) with a shared pass through expenses (taxes, insurances, landscaping, snow removal, parking cleaning, common electric, etc).

I'm one third into my 2 commercial mortgages, and I hope to make one third more in payments and one third in balloon in 7 years or so. I will sell the practices before I make that balloon payment, so I can use the proceeds to pay off the buildings. In 7 years, majority of the tenants would have renewed their leases and the sale of the practices will lead to a new 5 0r 10 years leases on their own with the buyer dentist(s). My hope then is that the rent roll from future renewed and new leases from 7 tenants will be much higher than today's rent roll, and can help me retire in my late 40's comfortably. Total sft of buildings are about 16,000 sft, and today's average sft base leases are $24, but the average future renewal options are closer to $30. I also manage the buildings myself, and charge 5% of the global CAM to all the tenants for the service.

 

[2TH MVR]

You basically summarized my businesses in your last 2 posts. You are very well versed in this. Do you own your own buildings?

Between my buildings, I have ave a total of 7 tenants (including my 2 practices, the other 5 are national tenants) with a shared pass through expenses (taxes, insurances, landscaping, snow removal, parking cleaning, common electric, etc).

I'm one third into my 2 commercial mortgages, and I hope to make one third more in payments and one third in balloon in 7 years or so. I will sell the practices before I make that balloon payment, so I can use the proceeds to pay off the buildings. In 7 years, majority of the tenants would have renewed their leases and the sale of the practices will lead to a new 5 0r 10 years leases on their own with the buyer dentist(s). My hope then is that the rent roll from future renewed and new leases from 7 tenants will be much higher than today's rent roll, and can help me retire in my late 40's comfortably. Total sft of buildings are about 16,000 sft, and today's average sft base leases are $24, but the average future renewal options are closer to $30. I also manage the buildings myself, and charge 5% of the global CAM to all the tenants for the service.

I own 1/2 of a 6000 sq ft building. The other half is owned by a Dermatologist. Just the single building. I wish I had thought like you years ago. Instead ... I invested in two Florida vacation properties which was so so. One made money. The other lost money. During my early years ... I was living "High on the Hog" as they say. Probably should have used the money I squandered on cars and boats and bought investment properties instead. Oh well .... you only live once.

Recently sold my ortho practice to a young orthodontist who now leases the office from me. In time .... I will sell the property. My wife and I are in the downsizing mode. 1st the house. Next the commercial building. Then enjoy our lives somewhere in the Caribbean islands drinking tropical drinks with little umbrellas.

 

[schmoob]

I own 1/2 of a 6000 sq ft building. The other half is owned by a Dermatologist. Just the single building. I wish I had thought like you years ago. Instead ... I invested in two Florida vacation properties which was so so. One made money. The other lost money. During my early years ... I was living "High on the Hog" as they say. Probably should have used the money I squandered on cars and boats and bought investment properties instead. Oh well .... you only live once.

Recently sold my ortho practice to a young orthodontist who now leases the office from me. In time .... I will sell the property. My wife and I are in the downsizing mode. 1st the house. Next the commercial building. Then enjoy our lives somewhere in the Caribbean islands drinking tropical drinks with little umbrellas.

I hope that first paragraph goes viral.
#firstworldorthoproblems

 

[753698]

It's better to own your property IMO. You control your loan payments by the type of loan you get. The loan payments will be a constant for 15-20 years (Typical loan amortization for commercial real estate). Each payment is going towards equity in your property.

With most leases ..... you are paying triple net (prop taxes for the owner, rent tax if applicable, management fees, insurance, CAMs, etc.). No equity in lease payments. The biggie is that depending how your lease is written .... the lease typically goes UP every year. Every year. Retail type leases are expensive. Your A/C unit dies .... YOU pay for a new one. Your CAM fees revolve maintenance for a building/parking lot for the long term benefit of the owner. Not you.

As for the amount of loan payments .... well that depends on how much you owe on the property.

Banks like tangible assets (building, equipment, supplies, furniture, etc.) to place leins on. Can't place a lein on future production/collections.

If the lease typically goes up every year, why will the selling dentist even want to sell his property, when he knows the buyer will have to keep leasing from him unless he want to relocate his practice?

Would you ever consider overpaying for the property a bit if it convinced the selling dentist to let go? Since ideally you do not want to lease?

 

[753698]

I've also heard that typically when you purchase a practice you should expect to see a decrease in production. It makes sense, because some of the patients who were loyal to the previous dentist might leave, but how much of a decrease should be expected? I've seen numbers like 25% from the ADA, but that seems extreme. I've also read somewhere that at the 6 month mark after the transition there is usually an increase in production, which also makes sense especially if the new dentist is doing more marketing, specialty procedures etc.

 

[2TH MVR]

If the lease typically goes up every year, why will the selling dentist even want to sell his property, when he knows the buyer will have to keep leasing from him unless he want to relocate his practice?

Would you ever consider overpaying for the property a bit if it convinced the selling dentist to let go? Since ideally you do not want to lease?

I receive passive income from the lease. Of course I would prefer to keep the property. The concern is at renewal. Every situation is different. I could roll the dice and hope to renew the lease, but I know that the lessee wants to buy the property. He'll have his chance when I feel the property is worth the most (4-5 yrs remaining on the lease).

 

[Cold Front]

I own 1/2 of a 6000 sq ft building. The other half is owned by a Dermatologist. Just the single building. I wish I had thought like you years ago. Instead ... I invested in two Florida vacation properties which was so so. One made money. The other lost money. During my early years ... I was living "High on the Hog" as they say. Probably should have used the money I squandered on cars and boats and bought investment properties instead. Oh well .... you only live once.

Recently sold my ortho practice to a young orthodontist who now leases the office from me. In time .... I will sell the property. My wife and I are in the downsizing mode. 1st the house. Next the commercial building. Then enjoy our lives somewhere in the Caribbean islands drinking tropical drinks with little umbrellas.

How close are you to your Retirement? I'm on dental town and a lot dentists there are retiring in practice.

I currently have a low 8 figure portfolio but carrying a mid 7 figure debt on my investments. I could sell everything today and call it a day, but at age 40 I need to keep myself busy. I do also have 3 other side businesses (trucking, truck parking and power wash) as passive income investments. I don't have a boat (I don't live near a big lake or a coast), but own residential property I live in and couple of nice cars (Porsche and a Merc). No other major expenses for me from here.

If you ever sell your commercial building more than what you paid for, the buyer will probably have their property taxes go up on the building if the local auditor and school district catch the sale - and most likely they will. That's a little secret seller usually doesn't get into with the buyer.

 

[Cold Front]

I receive passive income from the lease. Of course I would prefer to keep the property. The concern is at renewal. Every situation is different. I could roll the dice and hope to renew the lease, but I know that the lessee wants to buy the property. He'll have his chance when I feel the property is worth the most (4-5 yrs remaining on the lease).

I agree. In this situation, with just 1 tenant, I would sell.

 

[2TH MVR]

How close are you to your Retirement? I'm on dental town and a lot dentists there are retiring in practice.

I currently have a low 8 figure portfolio but carrying a mid 7 figure debt on my investments. I could sell everything today and call it a day, but at age 40 I need to keep myself busy. I do also have 3 other side businesses (trucking, truck parking and power wash) as passive income investments. I don't have a boat (I don't live near a big lake or a coast), but own residential property I live in and couple of nice cars (Porsche and a Merc). No other major expenses for me from here.

If you ever sell your commercial building more than what you paid for, the buyer will probably have their property taxes go up on the building if the local auditor and school district catch the sale - and most likely they will. That's a little secret seller usually doesn't get into with the buyer.

my portfolio is no where near as impressive as yours lol. I'm poor compared to you lol.
I still work PT in a Corp office. I'm 55 and I plan on working for another 8- 10 years. As CharlesTweed has said many times .... The work is pretty easy. I have no intentions of sitting around doing nothing. Just need some spending cash for fun things.

 

[753698]

I receive passive income from the lease. Of course I would prefer to keep the property. The concern is at renewal. Every situation is different. I could roll the dice and hope to renew the lease, but I know that the lessee wants to buy the property. He'll have his chance when I feel the property is worth the most (4-5 yrs remaining on the lease).

And if the lessee doesn't want to renew the lease? Does he just relocate the practice? That seems inconvenient, right? Most likely he will renew the lease at a higher price, and you get to keep your passive income, no?

 

[753698]

How close are you to your Retirement? I'm on dental town and a lot dentists there are retiring in practice.

I currently have a low 8 figure portfolio but carrying a mid 7 figure debt on my investments. I could sell everything today and call it a day, but at age 40 I need to keep myself busy. I do also have 3 other side businesses (trucking, truck parking and power wash) as passive income investments. I don't have a boat (I don't live near a big lake or a coast), but own residential property I live in and couple of nice cars (Porsche and a Merc). No other major expenses for me from here.

If you ever sell your commercial building more than what you paid for, the buyer will probably have their property taxes go up on the building if the local auditor and school district catch the sale - and most likely they will. That's a little secret seller usually doesn't get into with the buyer.

How were you able to make such high worth investments? It seems you are only 14 years into your dental career, assuming you graduated at 26. I gotta say, that's pretty impressive.

Did you just take out massive loans for all your investments? If that's the case, how come your portfolio is double the value of the debt you have incurred (I would expect it to be about even unless you've paid off 7 figure sums in less than 14 years). Sorry if this in intruding too much into your personal finances, I'm just very curious haha.

 

[Cold Front]

my portfolio is no where near as impressive as yours lol. I'm poor compared to you lol.
I still work PT in a Corp office. I'm 55 and I plan on working for another 8- 10 years. As CharlesTweed has said many times .... The work is pretty easy. I have no intentions of sitting around doing nothing. Just need some spending cash for fun things.

You are still young, specially for an orthodontist. lol

 

[Cold Front]

How were you able to make such high worth investments? It seems you are only 14 years into your dental career, assuming you graduated at 26. I gotta say, that's pretty impressive.

Did you just take out massive loans for all your investments? If that's the case, how come your portfolio is double the value of the debt you have incurred (I would expect it to be about even unless you've paid off 7 figure sums in less than 14 years). Sorry if this in intruding too much into your personal finances, I'm just very curious haha.

I graduated from dental school at age 32, so I have been practicing for exactly 8 years (as of this month).

Like I said, I have 2 practices and 2 commercial buildings (retail centers) that represent about 75% of my portolio. I also own other businesses, stocks and personal assets in the other 25%... Yes, I borrowed and leveraged to get to where I am. At this point, all the businesses are growing and all the commercial and residential real estates are appreciating very well. If I sold everything today and paid off those loans, I could comfortably walk away with a retirement level profit. However, I will continue to work for now and let everything grow and appreciate even more for another 5-10 years before I seriously consider selling anything.

 

[753698]

I graduated from dental school at age 32, so I have been practicing for exactly 8 years (as of this month).

Like I said, I have 2 practices and 2 commercial buildings (retail centers) that represent about 75% of my portolio. I also own other businesses, stocks and personal assets in the other 25%... Yes, I borrowed and leveraged to get to where I am. At this point, all the businesses are growing and all the commercial and residential real estates are appreciating very well. If I sold everything today and paid off those loans, I could comfortably walk away with a retirement level profit. However, I will continue to work for now and let everything grow and appreciate even more for another 5-10 years before I seriously consider selling anything.

Oh wow, only 8 years. Definitely did not expect that. Did you have any business/finance background before going into dental school, or did you just learn on the go? You've pretty much done in 8 years what it takes most dentists an entire career to do, reaching financial freedom.

 

[Cold Front]

Oh wow, only 8 years. Definitely did not expect that. Did you have any business/finance background before going into dental school, or did you just learn on the go? You've pretty much done in 8 years what it takes most dentists an entire career to do, reaching financial freedom.

I have been on these forums for 13 years, from pre-dent to a dentist. I had couple of good mentors on these forums (@Daurang was the main guy for me) and on dental town. I was fortunate to open my offices close to the height of the 2008 recession, and capitalized on low interest rate loans and cheap spaces to rent for a new practice. The banks that helped me finance my commercial loans don’t offer the products I used with them anymore. A lot changes in 8 years in life, so does the landscape in dental markets to open an office and other opportunities that comes with them. One of my associates is the mentor who wrote me the LOR to dental school, who I just happen to run into when I was searching for a new associate. Like anyone else, most dentists don’t have serious long term plans, and if they do, most can’t execute those plans with the right commitment. I don’t have kids (yet) or done anything else that could have delayed my progress in the last 8 years. Everyone has priories, mine was to invest early and cut back on dentistry early as well.

 

[753698]

I have been on these forums for 13 years, from pre-dent to a dentist. I had couple of good mentors on these forums (@Daurang was the main guy for me) and on dental town. I was fortunate to open my offices close to the height of the 2008 recession, and capitalized on low interest rate loans and cheap spaces to rent for a new practice. The banks that helped me finance my commercial loans don’t offer the products I used with them anymore. A lot changes in 8 years in life, so does the landscape in dental markets to open an office and other opportunities that comes with them. One of my associates is the mentor who wrote me the LOR to dental school, who I just happen to run into when I was searching for a new associate. Like anyone else, most dentists don’t have serious long term plans, and if they do, most can’t execute those plans with the right commitment. I don’t have kids (yet) or done anything else that could have delayed my progress in the last 8 years. Everyone has priories, mine was to invest early and cut back on dentistry early as well.

Yeah it seems life often gets in the way of many people ambitions. I want to learn as much as I can and focus as much as possible on my future goals, it;s really what motivates me.

I've seen that you have primarily invested in commercial properties, what is your opinion on investing back into dentistry? And by that I mean investing in multiple other practices to be run as an absentee owner, so it gives you the same passive income, and you can eventually sell that practice to the associate that has been practicing there. Either that or you could keep growing it as a group, and eventually sell the group. Would that be a smart way to invest your time and money, in your opinion?

 

[Cold Front]

Yeah it seems life often gets in the way of many people ambitions. I want to learn as much as I can and focus as much as possible on my future goals, it;s really what motivates me.

I've seen that you have primarily invested in commercial properties, what is your opinion on investing back into dentistry? And by that I mean investing in multiple other practices to be run as an absentee owner, so it gives you the same passive income, and you can eventually sell that practice to the associate that has been practicing there. Either that or you could keep growing it as a group, and eventually sell the group. Would that be a smart way to invest your time and money, in your opinion?

Investing in multiple offices would be a great way to get passive income and higher returns than a commercial real estate. However, the headache and the effort that goes into it is 100 folds more than the headache that goes into commercial buildings.

Having multiple offices require finding the right staff, specially a long term dentist. You could hire and delegate all the management of the offices to office managers, but that increases overhead and you still need to put some level of time to meet and talk to the managers and address many concerns they may not be able to resolve on their own. For me, I once had 3 offices and sold 1 because I couldn’t get the associate to buy the 3rd practice so I ended up consolidating offices #2 and #3 together.

Of the past 8 years that I was running my offices, I went through 7 associates, (not including the 2 that works with me now) and dozen other staff members. Unfortunately, if you hire associates, the majority of them have plans to work with you for few months to couple of years before they decide to own their own shop somewhere else. Often it is heavily encouraged by the spouse and/or families and friends of the associate to move on one day and have their own office. I learned a lot from this, so I just decided to not scale up from 2 offices and invest my money in more consistent and low effort and headache investment, and real estate made the biggest sense for me.