Key Takeaways
Before diving into the details, here are five practical insights for selling a dental practice that includes real estate:
- Real estate and practice valuations use separate methodologies, with EBITDA multiples for the practice and NOI/cap rate for the building, so a single rent adjustment can change combined proceeds by hundreds of thousands of dollars.
- Three primary structures, sale-leaseback, bundled sale, and retain-and-lease, each create different outcomes for liquidity, future appreciation, and ongoing landlord responsibilities.
- A structured, competitive bid process can create strong buyer tension, which often results in around 10 offers and valuations that can be roughly 30% higher than owner-directed sales.
- Buyer preferences differ by type, with DSOs and private equity groups often favoring sale-leasebacks, while individual dentists frequently prefer bundled purchases that can be financed with SBA 504 loans.
- McLerran & Associates coordinates both the practice and the building from day one; see how your real estate fits into the right transition strategy in a free discovery call.
How Dental Practices and Buildings Are Valued
A dental practice and its building are priced using different methods and often by different buyers. The practice is valued on EBITDA, which is earnings before interest, taxes, depreciation, and amortization, with a market multiple applied by dental support organizations or private buyers. The real estate is valued separately on NOI, or net operating income, divided by cap rate, or capitalization rate, by real estate investors or sale-leaseback partners. EBITDA reflects the practice’s normalized, recurring profitability, while cap rate reflects the return an investor expects from the property’s income stream.
Because the two assets use different buyer pools and different math, a small rent adjustment can compound across both sides of the transaction. A $24,000 annual rent change reduces practice EBITDA, which lowers practice value through the applied multiple. That same change also reduces property NOI, which lowers real estate value through cap-rate division. The combined impact on total proceeds can be far greater than the rent change alone. A shift in cap rate on the NOI can also create a substantial swing in real estate value by itself.
A CPA-led EBITDA analysis usually needs to come before any real estate appraisal. When the seller owns the building, rent paid by the practice may sit above or below market. Normalizing rent to market rates changes the practice’s reported earnings and therefore its normalized EBITDA used in valuation. Above-market rent depresses practice value, while below-market rent inflates earnings and can trigger buyer skepticism during valuation.
Lender requirements differ sharply between the practice and the building, and those differences can be some of the main factors that determine which structures are realistic. SBA 7(a) loans, typically used for practice acquisition, require 10–15% down with a 10-year term. SBA 504 loans for real estate require 10% down with a 25-year term and stricter owner-occupancy and economic-development criteria. SBA 7(a) dental acquisition loans carry Prime-based rates, with dental-specialized Preferred Lenders often achieving the lower end for strong deals. The longer real estate term reduces monthly debt service, which can support a higher purchase price, but only when the building meets SBA standards. If the building appraisal falls below the asking price or fails SBA occupancy standards, the real estate portion of the transaction can collapse even when practice financing is approved, which can force the buyer to renegotiate or walk away.
Understanding these valuation mechanics is essential, yet knowing the numbers is only half of the equation. The other half involves testing those numbers against real market demand through a competitive process.
Create Competition for Your Practice and Building
Competitive tension is often the most powerful lever a selling dentist can control. McLerran & Associates runs a structured bid process that can include or exclude real estate depending on the owner’s goals. Presenting multiple offers at the same time allows an owner who has not yet decided what to do with the building to see exactly how different buyers value each asset before committing to a structure.
This process typically generates around 10 offers per listing, and clients who go through it often achieve valuations roughly 30% higher than owners who sell on their own. The competitive environment also surfaces buyer preferences that would otherwise remain hidden. Some buyers want the real estate included, while others strongly prefer a sale-leaseback or a long-term lease. Seeing the full range of market appetite before signing a letter of intent, or LOI, can create a structural advantage that an unrepresented seller usually cannot match.
McLerran’s process rests on a diligence-grade, CPA-led EBITDA analysis completed before the practice goes to market. That preparation helps the numbers hold up when buyers scrutinize them, so deals are less likely to be renegotiated down later. That foundation keeps the competitive process credible and encourages buyers to keep bidding aggressively instead of discounting for uncertainty.
A competitive process surfaces multiple offers, yet not all offers are equal. The structure each buyer prefers directly affects the total value you receive and the terms you will live with after closing.
Match Buyer Type to Real Estate Strategy
Buyer preferences for real estate vary significantly by buyer type, and those preferences can be some of the main factors that shape which structure delivers the strongest combined proceeds.
Dental support organization and private equity buyers tend to prefer sale-leaseback arrangements. Sale-leaseback structures with a market-rate lease and a reasonable term, typically 10 to 15 years with renewal options, are a common workaround when the building and practice must be handled together in dental deals. During buyer due diligence, the dental support organization or private equity platform reviews the seller’s lease along with financials, charts, and equipment to confirm the EBITDA multiple on which the transaction is based. Lease term and assignment consent often function as due diligence gating items in dental practice transactions.
Individual dentist buyers often prefer to purchase the building alongside the practice, especially when SBA financing can bundle both assets. Lenders still treat the dental practice and its real estate as two distinct assets with separate appraisals, loan products, and risk assessments. Bundling them does not simplify the transaction and instead creates a parallel underwriting process that needs to be managed carefully.
McLerran vets buyer preferences and financial capacity before any meeting takes place. That screening helps ensure the owner is not exposed to a buyer who cannot close or one whose post-sale environment would compromise staff continuity and patient relationships.
Finding qualified buyers who align with your goals is critical, yet choosing the right structure also requires looking beyond the closing table. Owners usually need to understand what each option can deliver over the next decade, not just on day one.
Build a Structure That Supports Your Long-Term Outcome
The right structure depends on the owner’s priorities across time. Side-by-side financial forecasting across 3-, 5-, 7-, and 10-year horizons, using conservative recapitalization assumptions, can be one of the most reliable ways to compare options. When building that forecast, focus on five variables that often determine which structure best serves your goals:
- Cash-at-close: A bundled sale or sale-leaseback delivers the highest immediate liquidity, while retain-and-lease delivers less cash upfront but generates ongoing rental income. If you need full liquidity now, bundled or sale-leaseback structures usually sit at the top of the list, yet that choice affects the next four variables.
- Retained equity: Forming a separate real estate holding entity allows a selling dentist to retain ownership of the building, lease it back to the buyer on a long-term basis, and treat the retained real estate as an appreciating asset that generates ongoing rental income after closing. Retaining the building preserves future upside but also keeps you in the role of landlord, with property management duties and tenant risk.
- Tax treatment: Purchase price allocation assigns portions to goodwill, which typically receives long-term capital gains treatment, equipment, which can be subject to depreciation recapture at ordinary rates, and real estate, which has its own capital-gains and recapture rules. How that allocation is negotiated can be some of the main factors that determine your tax bill at closing. Consult a qualified tax advisor for guidance specific to your situation.
- Lease obligations: A sale-leaseback converts building equity into cash while the practice remains as a tenant under a lease typically lasting 10 to 15 years with scheduled rent increases. If you sell the building, you are no longer the landlord, but the practice, now owned by the buyer, is locked into that lease, which can influence how much the buyer is willing to pay for the practice itself.
- Legacy and continuity goals: Staff retention, patient relationships, and clinical autonomy all factor into which buyer type and which structure create the right fit, not just the highest headline number. A buyer who plans to rebrand, relocate, or restructure the team may offer more money but create a less desirable outcome for the people you have worked with for years.
A decision framework that weighs all five dimensions, rather than focusing only on cash-at-close, can help distinguish a well-advised transition from one that leaves value on the table.
Owner-Direct Risks Versus Professional Representation
A practice owner usually sells once in a lifetime, while a dental support organization negotiates deals every week. That information gap can be most acute when real estate is involved, because the seller must navigate two separate valuations, two buyer pools, and two sets of lender requirements. The buyer’s team has often handled that combination many times before.
Do-it-yourself close rates can run as low as 15–20%, compared to roughly 85–90% for McLerran’s clients. That gap rarely happens by accident. Informal or outdated leases in dentist-owned buildings frequently produce NOI figures that fail to support market cap rates when evaluated by investment buyers, which can result in $200,000–$300,000 gaps between expected and actual real estate offers. A seller whose dental office lease has a short remaining term may also see a reduction in practice sale price because buyers cannot secure long-term financing without a stable lease.
McLerran & Associates has completed roughly 2,000 successful practice sales totaling approximately $2 billion in closed transaction volume, with more than 10,000 practices evaluated. That depth of experience across both private-buyer and dental support organization transactions, in roughly equal measure, means the firm treats the real estate component of a dental practice sale as a core part of the engagement, not an afterthought. See what your practice and building may be worth, together and separately, in a confidential discovery call with McLerran & Associates.
Frequently Asked Questions
How do separate appraisals affect total transaction value?
When a dental practice and its building are appraised separately, each asset is valued using a different methodology and often evaluated by a different buyer pool. The practice is valued on normalized EBITDA with a market multiple, while the real estate is valued on NOI divided by cap rate. Because the two calculations are linked through the lease, and rent affects both EBITDA and NOI, a misaligned lease rate can compress value on both sides at the same time. Owners who address lease normalization before going to market, with guidance from a dental-specific advisor, can be more likely to see stronger combined outcomes than those who leave the real estate valuation to chance.
What are the 2026 down-payment and term differences between practice and real-estate loans?
The down payment and term differences outlined earlier often become critical during buyer financing. Conventional financing outside SBA structures typically requires 15–30% down on goodwill-heavy practice purchases, which can limit the buyer pool and affect your final sale price. These figures are general guidelines, and buyers and sellers should consult their lenders for terms specific to their transaction.
Which structure can deliver the highest long-term cash flow for a premier practice owner?
Retain-and-lease, where the owner sells the practice but keeps the building as landlord, can produce strong long-term cash flow for owners who do not need full liquidity at closing and who want ongoing rental income plus potential future appreciation. Sale-leaseback delivers the highest immediate liquidity but gives up future building appreciation and renewal leverage. A bundled sale can simplify the closing but may dilute the operating business multiple. The right answer depends on the owner’s time horizon, liquidity needs, tax situation, and legacy goals, which is why multi-year, multi-structure financial forecasting across 3-, 5-, 7-, and 10-year horizons can be an essential part of a well-advised transition.
Can I keep the building and still sell the practice at full value?
Retaining the building does not automatically reduce practice sale value, provided the lease between the real estate entity and the practice buyer is structured at market rate with an appropriate term, renewal options, and assignment rights. A below-market lease can inflate reported EBITDA and trigger buyer skepticism, while an above-market lease depresses EBITDA and reduces what buyers will pay. When the lease is properly structured before the practice goes to market, the retain-and-lease path can preserve full practice value while generating post-sale rental income. DSO buyers in particular scrutinize lease terms as a due diligence gating item, so getting the lease right before soliciting offers can be critical.
Conclusion and Next Steps
Real estate should not be treated as an afterthought in a dental practice sale. The structure chosen, whether sale-leaseback, bundled sale, or retain-and-lease, directly influences how the practice and building are valued, how buyers finance the transaction, and what the owner nets across different time horizons. The four-part journey, Understand Your Options, Create Competition, Find the Right Fit, and Maximize Your Outcome, applies to both assets at the same time, and coordinating them usually requires an advisor who treats the real estate as a core component of the engagement from day one.
McLerran & Associates is one of the few dental-specific sell-side advisory firms that runs both private-buyer and dental support organization transactions in roughly equal measure. That breadth gives owners a genuine side-by-side comparison that single-lane brokers may not provide. That track record, built over thousands of transactions in both channels, can be what a once-in-a-lifetime decision demands.
Discuss your practice, your building, and the structure that may best serve your goals in a confidential discovery call with McLerran & Associates. Call (512) 900-7989, email info@dentaltransitions.com, or visit dentaltransitions.com/contact-us.
Not ready to sell yet? The McLerran M&A Summit, October 29–30, 2026, is designed for owners who want to get educated before they decide. Attendees receive 4 CE credits and a complimentary practice valuation, a $2,500 value. Reserve your seat for the McLerran M&A Summit or learn more at dentaltransitions.com/contact-us.
