Buy Your Dental Practice Freehold
Buying your freehold with finance is more achievable than you may thinkSpeak to one of our experts020 4525 5312
- Terms up to 20 years
- Rates from B+2.1%
- Fixed Rates available
- No Early Repayment Fees
- Fit-Out Specialists
- Legal Advisors
- Specialist Dental Accountants
- CQC Advisors
- Unsecured up to £250,000
- Cashflow Finance up to £500,000
- Specialist Asset Finance
- Freehold Finance up to £1,500,000
Buy Your Dental Practice Freehold
Get the finance you need to buy your freehold and increase the value of your practice with Rangewell's support.
If you’re considering buying a dental practice, or you already own one, have you considered whether the freehold is worth it?
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Purchasing a freehold means you’ll assume full ownership of the property and the land it is built on, whereas a leasehold sees you having to pay certain ground rent and service charges to the owner of the lease.
As a dentist, you face two choices when it comes to buying your practice. A freehold is often more costly, whereas leaseholds are often the only option in high-demand areas such as city centres and high streets. In these areas, commercial units are typically part of larger buildings and the freehold won’t be for sale.
Whilst buying a freehold may be more expensive, it can be worth it if you’re planning a long-term investment. Not only do you save on the charges associated with leaseholds, but you’ll be able to command a higher asking price if you come to sell the property later.
To raise the money required to purchase a freehold, you will likely need a loan. At Rangewell, we help dentists get the finance they need to make better business decisions. We’ll work with you to identify the best lenders, the right type of finance and even negotiate on your behalf to secure the best deal.
Read on to learn more about buying a freehold dental practice.
Why buy a freehold dental practice?
A freehold property means you’ll also own the land on which the property is sited. Freehold ownership carries a number of benefits compared to leaseholds, with the sole downside being the added expense associated with the overall property value.
Owning a freehold means you don’t have to pay service charges or ground rent, which can be highly variable. Service charges can be fairly expensive and rarely add much tangible value to the actual management of your practice. Even in a building that the leaseholder pays to service with cleaning teams, you’ll still need pay your own cleaners for your practice specifically.
Additionally, leasehold owners often charge fees that aren’t specific to your practice or even the dentistry sector – instead they set rates based on general commercial or retail use. That can mean you’re paying for costs that have no real benefit to you. With that in mind, it can be hard to stomach continually forking out to leaseholders when you don’t have to.
Though it is unlikely, leaseholders have the power to ask you to sell your property back to them and can also decline lease extensions. This can put the future of your practice in doubt, especially if the leaseholder decides that a dentist isn’t the ideal fit for their portfolio or plans and wants to convert the building to another use.
Buying your freehold also helps you if you want to use your practice as a property investment, since you’ll have total ownership and control over the future of the building and land.
Finally, the most compelling reason to buy your freehold is the ability to change your property. With a leasehold, you can’t make significant changes to the practice, but with a freehold (and planning permission), you are free to renovate and upgrade your practice.
How to buy your freehold
There are two ways to buy a freehold property – either you acquire it when buying a business, or you arrange to buy the freehold from the existing landlord. Some dentists initially set up under a lease, happy to build their business in a busy location without ever considering the lease or freehold conditions.
If you don’t already own the freehold, acquiring it may be key to your financial future – especially if you intend to sell your practice and maximise profits ahead of retirement. You should first find out how long is left on your lease – anything less than 80 years means you’ll pay a significant fee to extend the lease anyway, so purchasing the freehold at this stage may be more cost-effective in comparison.
When you negotiate to buy a freehold from the landlord, their price will be based on how long is left on the lease and the overall value of the ground rent and service charges the building generates.
Additionally, they may have other plans for the property and may need further convincing that allowing your practice to purchase the freehold is the right choice. As a buyer, you’ll need to consider legal fees and other costs like stamp duty, too.
All of these costs may sound intimidating, but remember that owning a freehold carries more benefits than avoiding any worries around lease periods or extensions. If you’re planning expansions, upgrades or investments, owning your dental practice freehold is often worth it in the long-term.
Is buying the freehold ever a bad idea?
The costs of buying a freehold can dissuade some dentists from exploring the idea, though the potential value over the long-term usually makes the purchase worthwhile. However, some dentists are better served with a leasehold and focusing on adding value to the business in terms of goodwill.
If you feel you can add enough value in the goodwill of the business to sell it on for profit without needing the security of property, you may not need to buy the freehold. However, remember that any future owner has to be willing to take over the leasehold. If your lease hasn’t been extended for awhile, this will put new buyers off.
Ultimately, the decision will come down to your plans for the future: will your business sell at your ideal sum despite it being a leasehold? Can you afford to lose out on a potential sale because a buyer chooses a competing dental practice that does own the freehold?
Finance to buy your freehold
As you can no doubt tell, buying a freehold can be costly – but it should be viewed as an investment. The long-term value can outweigh the initial capital outlay. Taking out finance to help you purchase the freehold can be a sensible route to achieving your goals, as a lender may support the acquisition due to the improved overall value it will bring to your practice.
To get finance, you’ll need to prepare a business plan and talk to your leasehold owner ahead of time to establish an asking price. From there, you can negotiate with an existing lender to potentially boost your current loan to increase the borrowing enough to cover the purchase, or refinance to a new lender.
See property finance for a full range of borrowing options related to commercial property. You may also seek development financing if you plan to expand your practice, for example if you bought the freehold and wanted to build a new clinic or waiting room on the land.
Selling your practice
Once you decide to sell your practice, owning the freehold will transform your selling power and give you more leverage over the process. Rather than simply selling the goodwill of the business and having to make certain arrangements with the leaseholder to protect the new buyer, you can simply sell the entire business, including the property and freehold, in one package – for a far higher price than if you only own the leasehold.
When it comes time to sell, consider speaking to a selling agent. In our work as finance experts acting across the healthcare sector, we have great relationships with selling agents that specialise in dental practice sales and can also help a potential buyer get the funding they need to meet your asking price – so get in touch with our team today if you’re considering selling.
Other forms of dental practice loans
Aside from buying your freehold, other forms of finance can help dentists grow their practice in a positive direction. Whether that’s raising funds to bridge cash flow problems to allow you to recruit new staff, or leasing expensive machinery and equipment through asset finance. Regardless of what type of funding you need, Rangewell can help.
Work with our team to discuss your dental practice’s needs and we’ll help you navigate the lender’s market and negotiate a great deal on your behalf. Don’t allow finance to feel like pulling teeth – buy your freehold or get other forms of dental practice loans from Rangewell.
Last update: 29 September 2023
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