If you are trying to figure out whether to buy or lease property for your dental practice, check out our article on important considerations bearing on the decision of whether to buy or lease property. If you have already decided to buy property for your dental practice, there is a seed of optimism in the real estate market for savvy dentists who enter the market well-informed and with a good entrepreneurial spirit. In addition, for those dentists who have the necessary cash flow and good credit, many commercial properties are truly “on sale” and can be purchased for a steal. The business attorneys and dental practice attorneys at Nardone Limited have helped numerous dental practices enter sound and advantageous purchase agreements because of Nardone Limited’s familiarity with the needs of dentists and dental practices throughout Ohio. This post will highlight some important points to consider when you buy real estate for your dental practice, including the importance of guidance from an experienced attorney.
Choose the Right Broker for the Deal
There is nobody that understands the real estate market better than a real estate broker or agent. The selection of a hard-working, responsive agent will get your property search off to the right start. Try to find a real estate agent through the recommendation of another dentist, friend, or trusted professional advisor. Interview several agents before making your final selection. Make sure the agent understands the needs of a dental practice and the intricacies of the local real estate market.
Choose the Right Location
So goes the cliché, “Location, location, location!” Not only will this property be the location for your dental practice, it must also be a sound investment that will appreciate in value over time. Start by looking for a location with a diverse economic base and many employment opportunities. The area should offer good schools, shopping, and transportation. When you investigate an area, check the local zoning code. Meet with local zoning and building officials to see if there are upcoming changes in the law, land use planning regulations, zoning, or anything else that may affect property values. A good real estate agent can provide you with a market analysis and find properties located centrally within your patient base. Most importantly, meet with professional dental advisors who know the dental market and the location.
Make an Offer
When making an offer, start low, but not too low. Leave yourself room to negotiate but do not offend the seller. Rely on professional advice for negotiation strategies. Before submitting a written offer to the seller, make sure you have contingencies in the contract for a property inspection, environmental site assessment, survey, financing, title review, appraisal, and attorney review. These contingencies will give you an “out” if you find problems with the property that you do not want to assume in the purchase. The contingency period should be at least 30 days from the effective date of the contract. Be sure the contract gives you reasonable access to the property during the due diligence phase.
Do Your Due Diligence
In the due diligence phase, the most important stage of the transaction, you get to take a good look at the physical and legal condition of the property. First, your lender will hire an appraiser at your expense or require you to get an appraisal. The appraisal report needs to show a value for the property that is equal to or greater than your purchase price. If the value is lower, you can reopen negotiations with the seller. If negotiations fail, the lender will require you to put more money down on the property. Second, hire a good commercial property inspector to inspect the physical condition of the property and provide you with an inspection report. You may want to discuss property defects discovered during the inspection with the seller. Third, if this is vacant land or if required by your lender, you may want to get a Phase I environmental site assessment of the property and an asbestos survey. For a Phase I, an environmental consultant will inspect the property, review public records about the past use of the property, and interview adjacent landowners to determine the likelihood of environmental contaminants on the property.
Your attorney will guide you through the due diligence process. The attorney will review the title work and surveys to ensure there are no other legal interests that could interfere with your intended use of the property. Your attorney will also review the terms of your real estate purchase contract, loan documents, appraisal, Phase I environmental site assessment, and other due diligence information.
Taking Home the Keys
This is where all of your hard work pays off. On the closing day, you sign the closing documents at the title agency. This includes loan documents and documents required by the title company to close the transaction, record the deed, and issue your title insurance policy. The key document at the closing is the settlement statement, which shows the cash flow of the transaction. Your attorney will make sure the documents are consistent with the terms of the real estate purchase contract and your loan commitment.
Purchasing property for your dental practice is a time consuming and expensive endeavor. If done right, it can help take your practice to the next level. If not done right, purchasing the wrong property could have a serious impact on your practice, cash flow, and practice morale. The considerations above are not exhaustive, but will certainly be a good start in determining what property is best for your practice.
Vince Nardone is the President of Nardone Limited, which specializes in tax, business, real estate, and estate planning for professional practices and their owners. If you need assistance or have questions regarding your real estate matters, please contact Nardone Limited.