Dental practice real estate calculator

How this calculator works

Property borrowing is the price less the down payment. Both loans use the same fixed-rate monthly engine as the loan calculator, so a balloon on the property loan produces the balance remaining after the scheduled payment at maturity.

property_loan = property_price - property_down_payment
property_initial_cash = property_down_payment + property_closing_costs + property_improvements
property_cash_occupancy_cost = property_scheduled_annual_debt_service + property_operating_cash_costs
combined_scheduled_debt_service = practice_scheduled_annual_debt_service
  + property_scheduled_annual_debt_service
combined_financing_and_property_cash_cost = combined_scheduled_debt_service
  + property_operating_cash_costs
cash_occupancy_share = property_cash_occupancy_cost / practice_collections

Reading the cash occupancy share honestly

The property mortgage payment appears once, in the property line. It is included in the combined debt service and in the property cash occupancy cost, which are two views of the same payment, not two payments.

The cash occupancy share includes loan principal, so it is not comparable to a rent or occupancy expense percentage in a profit and loss statement. Principal repayment is not an expense. Comparing this figure with a published occupancy-cost benchmark will mislead you in the direction of thinking ownership is expensive.

What property initial cash is not

It is the cash the property needs: down payment, separately paid closing costs and initial improvements. It is not total practice-plus-property buyer cash. The practice's own equity, transaction expenses and working capital reserve are separate and belong in the acquisition calculator.

Assumptions and exclusions

• Both loans are fixed rate with equal monthly payments in arrears. No interest-only period, no variable resets.
• Property operating costs are exactly the annual figure you entered, without growth.
• No income taxes, no depreciation, no interest deductibility and no cost-segregation analysis.
• No rent received from a co-tenant, no vacancy, no capital reserve for roof or systems replacement beyond what you entered.
• No property appreciation and no exit. For exit value and the opportunity cost of the down payment, use buy or lease your dental office?
• Financing the property entirely with cash removes the property debt service. It does not remove the operating costs.

This is not an appraisal, not a property tax analysis, not a lending decision, and not a statement that a payment lower than your rent makes buying the better decision. A payment-versus-rent comparison ignores the down payment, the exit and the money's opportunity cost, which is precisely what the buy-versus-lease tool is for.

Questions to ask about the property and its financing

• Is the loan on the property fixed or variable, what is the amortization, and is there a balloon before you intend to sell or retire?
• What loan-to-value will the lender actually advance on this property type, and does it require an appraisal and environmental report first?
• Will the lender require cross-collateralization with the practice loan, and what happens to one loan if the other defaults?
• Who owns the property entity, and what lease will the practice sign with it?
• What does the building need in the next ten years (roof, HVAC, parking, compliance work) and is that budgeted?
• If the practice and property closings depend on each other, what happens if one is delayed?