Why is now a great time to build your practice?

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Why is now a great time to build your practice?


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Experts say that current market conditions have created an unprecedented opportunity to invest in your practice at historically low costs. (DTI/Photo Zsolt Bota Finna, Dreamstime.com)
Live Oak Bank

By Live Oak Bank

Wed. 21 September 2011


If you’ve been thinking about building your own dental practice, now’s a great time to jump in. Market conditions continue to support favorable mortgage rates and construction costs, while the U.S. government has reached out to small businesses with even greater tax deductions for equipment purchases in 2011.

In addition, owning your commercial property still appears to be a reliable and potentially profitable investment for your future.

Favorable commercial property values

Commercial property values are at their lowest level in decades, providing purchasers an opportunity to obtain far more for their investment than they could have just a few years ago. Plus, property values are likely to increase over time as the economy recovers, making commercial real estate a relatively secure long-term investment.

Commercial property can also become a potentially valuable source of retirement revenue — either through outright sale of your practice and the underlying property or through sale of your practice and lease of the property, creating a life-long revenue stream.

Historically low mortgage rates

As with residential properties, commercial real estate mortgages continue to be at historically low levels. Today it is possible to secure long-term commercial mortgage payments that rival the rental payments for a comparable leased space.

In addition, down payments for financing can be as low as 10 percent of the total loan amount if financing is obtained through an SBA program.

Stable construction costs

Costs for construction materials such as plywood, copper and diesel fuel have climbed during the “great recession,” jumping 5.4 percent during 2010 (according to Modern Distribution Management, “Construction Firms Face higher Materials Costs, Flat Building Prices,” www.mdm.com, Jan. 13, 2011). Nevertheless, construction companies are still holding the line on bid prices due to intense competition and weak demand for their services.

As demand for commercial building construction increases with a recovering economy, expect construction costs to increase as well. Now is an excellent time to build your own practice while the costs of building remain relatively stable.

Section 179 tax deduction

Higher allowable IRS Section 179 tax deductions for 2011 mean your investment in building your practice actually costs less. The 2011 deduction limit is $500,000, up from $250,000 previously, and can be used to write off the costs of purchasing new or used equipment, including new software.

The 2011 limit on equipment purchases that qualify for the deduction is $2 million, up from $800,000 last year. In addition, the government offers a 100 percent “bonus” depreciation on new equipment, taken after the $500,000 deduction limit is reached.

In addition, you can purchase equipment for your new practice any time during the year, and as long as the equipment is placed in service during the 2011 tax year, you can write it off for 2011 — even if you do not start making payments on your purchase until 2012.

So if you’re considering building your own practice, don’t wait. Current market conditions have created an unprecedented opportunity to invest in your future at historically low costs, but the opportunity won’t last forever.

Live Oak Bank specializes in dental construction loans. Whether you are looking to expand, remodel or break ground, we can provide you with financing.

For more information, contact Live Oak Bank.





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