Doctors invariably want to sell their office building at the same time they sell their practice. Selling the building with the office will usually result in tens of thousands of lost dollars for the seller. It is known as the “I just don’t want to be bothered with anything after the practice is sold” syndrome. It can have a devastating effect on the financial net worth of the retiring doctor at a very critical time in his or her life.

Contrary to what you may think, real estate is not an integral part of your practice. You may have thought for years that you would make a killing by practicing in an office building that you purchased. Real estate is an investment, but unless you are among the very fortunate, it probably is not worth much more than you originally paid for it (especially when you consider the effects of inflation). You may think that the purchaser is the only candidate to buy your office building, so you want to lock the purchaser into buying it before changing his or her mind.

First of all, your practice is probably worth much more than your building. Doctors think of value in terms of sticks and mortar, not cash flow. If your practice is worth six hundred thousand dollars, for example, most new doctors pale at the thought of going that much into debt just to get into a practice. You also want to add the value of your building to that amount, let’s say five hundred thousand dollars, so now we are talking about a combined sale price of one million one hundred thousand dollars! You’ve just eliminated a significant portion of potential candidates by trying to add the value of the real estate to the package. Most new purchasers cannot get financing for both the practice and the real estate.

Second, everyone wants to negotiate the price of the real estate. You will be expected to offer a significant discount for the package, and you will end up unnecessarily losing tens of thousands of dollars.

Instead, you can rent your office to the buyer of your practice and collect rent for the next 5 or 10 years. After five or ten years of collecting rent, you still own the building! By separating the sale of your real estate from the sale of your practice, it will increase your income from the property by hundreds of thousands of dollars.

So sell your practice and rent your office building to the purchaser of your practice. It will make things a lot easier for the transaction to be completed and it will result in a more profitable transaction for you. Call AFTCO at 800-232-3826 or visit our website at www.aftco.net. It’s time to call AFTCO!

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