property and a building’s structural components. Your CPA will play a central role in making these distinctions and guiding you through the cost segregation process.
The cost of the engineering study that forms the basis for cost segregation can appear daunting, but the advantages in tax savings far outweigh the initial investment. In the typical dental practice, for instance, assets that qualify for accelerated depreciation can range from 20 to 35 percent of the total building cost. The tax savings this represents can offset the costs of owning or constructing your building, providing greater leverage when designing your dream practice.
Take Advantage of Section 179 Deduction
The Internal Revenue Service provides a significant tax benefit to small businesses that reinvest through equipment purchases, leases or financing. Under Section 179 of the Internal Revenue Code, you may be able to write off the entire cost of an equipment purchase in the year it is purchased, instead of depreciating it over many years.
• Sole proprietors, partnerships and corporations can deduct the full cost of equipment and furniture — up to the current tax year’s annual maximum.
• Business-related property purchased during the calendar year typically qualifies for the Section 179 deduction, and can include:
° Tangible personal property such as office furniture, equipment, and computers
° Property contained in or attached to a building (other than structural components), such as counters and signs
° Certain off-the-shelf computer software
• It does not matter if you have not yet paid for the purchase. You simply need to put the equipment into service before the end of the calendar year to claim the Section 179 deduction.
The Internal Revenue Service provides a significant tax benefit to small businesses that reinvest through equipment purchases, leases or financing.
Summary
Once you have taken the significant step of starting your financial plan, pat yourself on the back! Financial planning is one of the more complex aspects of any practice construction, expansion or remodel project and requires considerable discipline to paint a thorough portrait of your financial status and needs. Whether you are just starting to work on improving your financial profile or have funding in hand, you have demonstrated determination in moving your project forward and are ready to implement your vision of a new, functional and contemporary dental office design.
Contributor Biography
Wells Fargo Practice Finance is the only practice lender selected especially for ADA® members and endorsed by ADA Business ResourcesSM. With more than 25 years of experience helping dentists transition to ownership and manage growth, they understand the business of growing successful practices and provide customized financing, complimentary planning resources, and personalized support to help dentists acquire, start, expand, and refinance their practices. They can be reached at 1.888.937.2321 or https://practicefinance.wellsfargo.com/dentists.
1 “Turning Point? U.S. Commercial-Property Sales Plunge in February.” Wall Street Journal. Available at http://www.wsj.com/articles/turning-point-u-s-commercial-property-sales-plunge-in-february-1458639002. Accessed May 16, 2016.
Chapter 3:
Location Selection and Siting Concerns
Chapter 3:
Location Selection and Siting Concerns
By John Adams, A.I.A.
LEARNING OBJECTIVES
Evaluate potential properties for their suitableness for a new dental office
Identify common pitfalls if selecting a rental space or a property to purchase
Gain control of unexpected site development costs
Navigate through the various aspects of a proper due diligence process
Prepare materials to meet with the city or county for permit pre-application guidance
This chapter aims to help you with due diligence in looking at a property and identifying issues that can be obscure or costly. Proper due diligence can go a long way to averting a big mistake in land acquisition or taking on a lease of property that has hidden deficiencies.
A FEW PROPERTY DEVELOPMENT TERMS
Some jargon is inevitable when talking with real estate professionals or city officials. Here are some key terms:
Site: A property where you propose to develop or build your project. It could be empty land or have an existing building. Think of it as shorthand for “project site.”
Leasehold Improvement or Tenant Improvement: A remodel or improvement of an existing building for the benefit of the tenant. Tenant improvements are largely interior work but adding new entry doors or windows to the exterior is common.
Use: In real estate and permitting jargon, “use” refers to the type of entity or activity the location contains (e.g., dental office, retail store, apartment, etc.). Use is determined by local code officials.
Zoning: The aspect of land use that categorizes land by desired use and other features and then maps these zones within the municipality. Zoning is what (hopefully) keeps factories from being built next to houses. Again, this is determined by the municipality and is almost always predetermined.
Due Diligence – First Steps
You have identified a community in which you wish to practice and have a general notion of what type of property that interests you (storefront, medical office building suite, raw land, etc.). So when you locate a possible property what do you look for? Before getting too far along with a negotiation, start your due diligence early by taking a look at several top level items:
• Legal use. Is a dental office allowed on this property? Don’t assume that just because there is a dentist next door that the same use is allowed on your site as well. A real estate agent maybe able to tell you, at least generally, if dental offices are allowable on the site. An architect or city official can most likely give you a more definitive answer.
• Change of use. Would your dental office be a different use than what occupied the site before? If so, then this may be considered a change of use. Changes of use are sometimes granted outright. But often municipalities cite a change of use as a trigger
