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Should You Buy a Home or a Dental Practice First

byPractice Pirate January 11, 2020 0 comments

It is typically recommended to delay home ownership until after a practice purchase because the practice generates income, while the home does not. Furthermore, ownership of a person’s primary residency is often more of an emotional transaction (it is a lifestyle decision) as opposed to a financial one. With this in mind, it is often wiser to purchase a practice before purchasing a home for two reasons:

1) Your debt to income ratio when you go to purchase a practice will likely be higher if you have a mortgage. Depending on the size of your mortgage, the practice you have identified to purchase may not have enough cash flow to support all of your monthly obligations.
2) More importantly, when you own a home, the radius that you are interested in buying a practice is often limited and it is easier to find a home near your practice than to find a practice near your home. Once you own a home, you are often emotionally invested in the community – you build relationships and develop habits that are difficult to leave behind regardless of how good the opportunity may be.

Art Widerman is a CPA in Tustin, CA who focuses on dentists. He has a podcast called the Art of Dental Finance and the episode linked below explores home ownership and practice purchases.

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