What are the rules regarding veterinary practice rent?
Q: What are the rules regarding veterinary practice rent?
Depending on your perspective and your situation, there are a few general guidelines, says Veterinary Economics Editorial Advisory Board member Dr. Karl Salzsieder, JD, owner of Salzsieder Consulting and Legal Services in Longview, Wash. Keep these four things in mind:
1 Fair market value. If you're a landlord who's determining rent, it should be 10 percent to 12 percent of the fair market value of the building per year. Or look at it like this: Veterinary practice rent should be 1 percent of the practice building's fair market value per month.
2 Gross revenue. From a practice owner's perspective, the rent should be about 6 percent or 7 percent of the gross revenue per month. That rule is modified if you're expanding, either with new construction or remodeling. Rent, in the short run while the practice grows into the new facility, shouldn't exceed 8 percent to 10 percent.
3 Regional issues. For California residents, standard rental rates are a whole other animal. Real estate is so valuable that many practices get less than the fair market value percentage as a rent agreement.
4 Corporate practices. Corporate purchasers prefer to pay rent at as low as 4 percent of gross to a maximum of 6 percent of the gross, with the possibility of increasing the rent by 3 percent per year for inflation.