By Megan Urban, Practice Transition Consultant, Omni Practice Group
“Should I Sell My Building with My Practice?”
I get this question a lot and there’s no correct answer, BUT we have some experiences and thoughts to share so you can make the best decision.
Typically, the doctor working in the office is the best person to own the building. Some doctors and CPAs will tell you not to sell the building and get the lease income each month. But ask yourself if your property is up-to-date so that the new buyer will remain in the space. We often see new doctors find a new space nearby that they can make their own and you are left with empty space. In my experience, an empty office has been very difficult to lease or sell. There aren’t as many start-ups these days with new doctors eager to move into the empty building. You may be in an area where the real estate could be purchased and used differently. Typically, you will get a better price for your building from another practitioner in your field since it is already set up for clinical use and no major remodel is needed.
Sometimes I see doctors that want to sell the practice only and over-inflate the lease to earn more monthly income, but that can be a problem similar to the situation above. If the new doctor is paying too much, they may look for a new location and leave your space.
If you have other rentals and you enjoy being a landlord, this may be a good opportunity for you. Be sure to make solid lease terms so you and your tenant(s) have a comfortable long-term relationship. I strongly recommend using an industry-specific attorney to assist with the lease details.
Sometimes CPAs will recommend that you sell your practice on January 2nd and your building on the next January 2nd. This enables you to have one year with your income from the practice alone. The next will be solely the income from your practice sale, and the following year your income will be the building sale. Sometimes this scenario makes sense and can be accommodated, but not every time. We have also seen the real estate and practice plan to close separately on different dates and that gives the buyer a chance to change their mind on one or the other and you don’t want that to happen.
Every transition is different and we are happy to discuss the right option for you and your location. We recommend you work with your CPA and financial planner to put together a plan to reduce taxes that makes sense based on your debt, retirement savings, etc. Sometimes you have to consider what your options are with buyers and then make the best decision possible. We are here to help you through this important part of your life and make the process simple and profitable.
