Starting a medical centre?

[Dan]

Starting a medical/dental centre?

I remember reading a while back that someone here did something similar to this..

Anyway, I'm a dentist, and have been think of starting a practice in my local area for a while.
There are a few in the main shopping area.. but there is a relatively new estate just a bit further out in the north part of the suburb (est 15yrs ago or so).
There is a shopping centre at this new estate that has a safeway, and other food/newsagents etc type shops. It services the new estate and seems always busy.
There is a large vacant shop that has been vacant for some time, it used to be a video store.
It has potential to easily fit out a 2 room dental practice, a couple of room medical practice, and possibly extra rooms for specialists or radiology etc..

I am yet to make formal enquiries regarding asking price for rent etc..
I am sure there is negotiation room though, given the longstanding absence of a tenant..
But since I am only in the thought stage I would like to ask for suggestions..

Is it too risky to attempt to negotiate a lease, fitout the whole place and attempt to sub lease to GPs etc..
Should I try to negotiate only leasing half the space that I would use?
Should I try and get the landlord to commit to a medical centre and just lease the rooms I require?

Should I approach the council as a first point of call?

I am a complete novice, any ideas would be appreciated!
Thanks!

 

[Aceyducey]

Dan,

If the figures work, is buying the vacant shop an option?

Cheers,

Aceyducey

 

[Dan]

Possibly.. that would be the ideal option...although finance could be the problem..

It would be hard to get an idea of a fair price to offer though.. considering its larger than most of the surrounding shops..
I'm guessing it would be probably out of my range..

 

[geoffw]

Possibly.. that would be the ideal option...although finance could be the problem..

It would be hard to get an idea of a fair price to offer though.. considering its larger than most of the surrounding shops..
I'm guessing it would be probably out of my range..

Dan,

You're starting from the wrong side already- you're being too negative from the beginning- but I guess dentists are always looking down in the mouth.

It should not be too hard to get an idea of cost. For commercial properties, rent is usually related to price- the yield may vary though according to the reliability of the tenant.

Positives:

.Youre a dentist. Servicibility will be less of a problem than for many
.You may be in a position to get someone in with you
.If you don't keep up the business yourself, you will be able to get in other tenants
.Servicing the costs will probably be a lower drain on cashflow than renting a comparable premises
.You will own the premises at the end

Remeber though that commercial leases may require at least 30% deposit, and may only be available for a 10 year p & I

 

[Aceyducey]

I'm guessing it would be probably out of my range..

If that's what you believe it probably is

If you change your guess, you might find interesting options for financing it.

IE..vendor leaving cash in the deal, family/friends funds, part-ownership in consortium with another dentist or other health professional, a backer, or you may simply be able to purchase it for less than the value you perceive it to be (remember it's vacant & basically not worth anything in that state!).

Cheers,

Aceyducey

 

[Dan]

Yeah you guys are right.. but there is also the factor of setup..
Probably looking at minimum $200K to set up equipment and fit out.. just for the dental side of things..
I am being negative though.. I guess a bit cautious.. especially knowing I can't expect to walk right in to a patient base either.. Will take lots of marketing and time to build up to a time when I am working busy full time..
I shall endeavour to make enquiries about actual costs soon..

 

[geoffw]

Yeah you guys are right.. but there is also the factor of setup..
Probably looking at minimum $200K to set up equipment and fit out.. just for the dental side of things..
I am being negative though.. I guess a bit cautious.. especially knowing I can't expect to walk right in to a patient base either.. Will take lots of marketing and time to build up to a time when I am working busy full time..
I shall endeavour to make enquiries about actual costs soon..

Fair comment...

Do you have equity or capital available?

If so, is there a way you might be able to share with someone else (dental or other) who may be interested in co leasing?

(But then again- I see so much stuff with dcotors' names, I assume they are mostly using their funds in similar ways?)

 

[Dan]

Yeah I have a few colleagues that I may be able to approach to join up..
Although ideally I'd like a multiple practitioner practice, it will take time to build up a good patient base for one person, let alone two.. so that would be the reason that someone would be reluctant to join up i suppose..
Plus there are already 4 or 5 dentists in the suburb.. although 1 or 2km away.
But this is a prime exposre site, compared to the others..

I've got some equity, I have a house in the area PPOR with around $70,000 equity, plus around $50,000 in shares that I can liquify if needed..
Outstanding loan of around $235,000
I have got plans being approved to extend my PPOR, but I can put that on hold if need be..
I'm only 25, been qualified 4yrs, I'm clinically where I want to be, its just the business side of things I need to learn a lot about..

Thanks for all the replies so far!

 

[Kristine..]

http://www.djs.com.au/mainmenu/pracsal/psales/pracsale2a4a.htm

Dan

Have a look at this site

Kristine

 

[Dan]

Thanks, Yeah I check DJS from time to time..I won't comment on the reputation of the guy that runs it..
I think goodwill these days is overrated..
Many of the practices are asking quite a lot too..
Plus I like the idea of somewhere close to home that I could possibly make some extra money by leasing to GPs..
And you often have to wonder for the practices that already have a couple of practitioners.. why doesnt the part-time guy want to buy in?

But yeah, I'd definately consider buying existing, there is more opportunity to walk straight in to established clientele..

 

[Aceyducey]

Plus there are already 4 or 5 dentists in the suburb.. although 1 or 2km away.
But this is a prime exposre site, compared to the others..

Why not see if any of them want to partner

One of them must be hurting from rent or want a better location.....plus has the equipment already.....

Instant cred & access to a client base.....

Go cautiously though don't want one of them to buy the premises & move in!

Cheers,

Aceyducey

 

[see_change]

And you often have to wonder for the practices that already have a couple of practitioners.. why doesnt the part-time guy want to buy in?

I'm a GP who has employed a series of Part time / Full time GP's over the last 15 years. Reason? They don't want the hassel of running a business. They want their money and to be able to go home with out having to worry about paying staff / superannuation / Bills / Leasing / ACIP / PIP / NPS / Doing the accounts / oh , and then theres accrediatation / Continuing education just to mention a few things . You have to pay all the bills when you have a quiet patch. Gee Where do I find the time to do IP's.....

Is there a over or under supply of GP's in the area. Ring up a few to see how long you have to wait to get an appointment. How hard is it to get GP's to work in the area ( there is an undersupply of GP's in most areas of Australia . Maybe put an add in Medical Observer / Australian Doctor saying what you're thinking of doing , asking for expressions of interest.... The Family Medcine program in the training organisation for GP's. They used to have a magazine.. put an Add in there . Talk to some medical locum agencies. Tell them what you're thinking of doing , they can be very helpfull.

Check with the council to see if there are any applications for medical centres in the immediate vacinity. Someone I know thought he got a real bargain in a cheap practice... took over , only to find out a Large medical practice involving an ex employee of the practice he was buying opened nearby two days later. The principle had an anti competition clause , but the Employee didn't )

Just a few thoughts while I'm waiting for a patient who's running late

See Change

 

[see_change]

Subsequent to the previous post , while I'm waiting for another patient who is running late..

The reason I set up my own practice, was that I felt I could make more money by working for myself , than by working for someone else.

That's true, but I work a LOT HARDER..

In the last three years I've made more money out of property investing than i've paid myself as a wage for the last ten years of working as a Doctor, and that was only in catching the last third of the current property cycle.

If I had my time again, I'd probably work for someone else and spend half of my spare time on property investing and the rest relaxing. If I'd done that I'd have my Waterfront property on Pittwater by now.

See Change

 

[Dan]

Thanks a lot, esp see change..
Good perspective to think about..

 

[straight]

go big

dan, my wife and i took over a solo gp 7yrs ago, expanded to new place and 5 rooms 3yrs ago, and now have 7 gps total. now we need more space. its a great little practice, but it was a seriously huge task and whilst its great to call the shots and set the direction of the practice, we have employed gps that can earn what the principles of the practice do with 0% hassles. if you want to hold the reins then go for it, but there are always dentists looking for employees and it wont be hard to get a position with a view.

as for the premises, go BIG and hire a manager to look after the bs. if you want gps in there go bigger. the future doesnt appear to be in small practices for dentists or gps.

imho in the end its all about managing individuals and managing differences.

there is alot in what see change says, of course its horses for courses.

if you decide to build or lease feel free to pm me, i might be able help with advice on lease terms etc. either way, good luck.

 

[thefirstbruce]

Dan, I am a physio and have been sniffing around for commercial RE north of Bris to set up a practice with a dentist friend. He is 26 and I'll throw these points out for consideration.

- have you been OS yet? if not, better to go now, before setting up. Once you are self employed bucko, with overheads, you ain't going OS for a long time.

- are you in a stable relationship? if not, it will be harder to work for yourself. and harder to meet someone after you set up. you will be time poor for a while.

- what are your professional goals? my dentist friend was aiming to set up a practice with enough space for 3 rooms eventually. The idea being to work his butt off for 3-5 years, with grads onboard to carry overheads, then go back to specialize in his early 30s with passive income from the clinic.

- check out what the availability of dental grads is/will be in 3-5 yrs. check out locum availabilities.

- Seechange might disagree, but the reason there is a shortage of GPs is that over half the graduates these days are females (at least in Qld). They are very resistant to setting up their own practices, cos they don't like being married to the job, or being time poor, before or after kids. I understand dentistry is the same. If I can be terribly unPC about what my dentist friend has observed, he says female dentists can't cut it. They don't have the strength or stamina to put in full working weeks for more than 3 years. Therefore, they rarely set up in business themselves. This may end up meaning there is a greater supply of employee dentists, just as there is in medicine nowadays.

- keep in mind the demographic of your target area, and that private health insurance premiums are only going one way.

- lessors love professionals cos they know you'll be around forever. So if you do lease, which I wouldn't recommend, screw them down, and get a rock solid contract that goes mostly your way.

- goodwill sucks. forget traditional accounting definitions in dentistry.

- I suppose you know lead shielding on clinic rooms costs a fortune. Though some dentists seem to be flying blind without x-r now. Though my mate reckons this is poor practice.

- Don't get carried away with this site because it has good visibility. If you are good, people will find you in the side or back streets, esp if parking is easier. I note a lot of specialists and dentists are buying houses now and converting after applying for zone change or material change of use. Keeps overheads down.

- We spoke with a new Westfield retail operation north of Brisbane a few weeks ago about leasing space. THey were prepared to lease to us for $110 a sq metre, 4 months rent free, pay 100% for air con fitout, and were very open to significant contribution for the rest of the fitout. The point being, retail hasn't got a bright future. Aussies are maxed out on credit at the moment, and retail can only soften. So there is very likely going to be more retail shops coming up for cheap leases.

- Personally, I'd recommend you buy residential property in a side street off a main road, near a current healthy shopping precinct, in an area with a growing population. This gives you the opportunity to value add by applying for zone change. If there is a shortage of medicos in the area, the council may bend a bit to help you set up.

- Be wary of going into a joint operation with GPs or anyone else. Overheads can quickly blow out, or if they change their minds or get divorced or whatever, things can get messy. Plus if the GPs have lousy personalities or high staff turnover or transient locums, that will reflect poorly on your practice.

Am too tired to think of anything else.
If you want to talk to my mate, I think he would be happy to discuss things further. He has already run his own practice in the bush in conjunction with a graduate stint with the public sector.

 

[Daniel]

Hi Dan,

The other guys here would be able to help with the real estate side of things more than I could, but if you need some tips on setting up any business systems, especially credit policies, credit department (billing, debt collection) etc, let me know, am happy to help. I am debt collector, and dental bills are normally THE HARDEST debts to collect if the credit procedures are not good enough.

Outsourcing (some) business functions you do not feel comfortable with might also save your initial capital for other things, since I read above that capital might be used for purchase of the building? Also, make sure you leverage the long vacany. Ask for the first 6 months rent-free to free up cashflow for other things

Always welcome to call or email me:
0409 482 183, [email protected]

 

[geoffw]

dental bills are normally THE HARDEST debts to collect if the credit procedures are not good enough.

Presumably because people only have to pay after the pain has stopped? Maybe they need to pay while they still have a toothache, or just before the drill gets applied?

 

[Daniel]

Nice philosphy! (Drill whirring away in hand) "So, Mr. Smith. Before I fix your pain, which kidney can I have, the left or the right?" (evil grin).

I guess pain makes you promise anything. That's why you need a good credit policy in place. ;-)

 

[geoffw]

Hehe. I can just see you there, knocking on the door of a recalcitrant debtor.

Just as he is about to slam the door in your face, you switch on the CD of a dentist's drill...

(Mind you, some of the music they play in the record shops has the same effect on me )