I own the buildinghow much rent do I pay myself?
Gary I. Glassman, CPA
Gary I. Glassman, CPA, is a member of the Veterinary Economics Editorial Advisory Board who has worked exclusively with veterinarians for more than 20 years. He specializes in accounting, tax planning, and practice transitions and is a partner with Burzenski and Co. P.C. in East Haven, Conn.
When you're the veterinary practice owner and the landlord.
It isn't uncommon for a veterinary practice owner to own the hospital building-in which case, said party pays rent to her or himself. But how much? Fetch dvm360 conference speaker Gary Glassman, CPA, has a standard formula to determine what's fair, although it might not be what you think.
"Many people look at their rent cost [as] a percentage of the gross revenue of the practice, but that's truly not the right way to set the rent," Glassman says.
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Instead, Glassman points to a "triple net lease" scenario wherein the tenant pays for utilities, insurance and property taxes. In such an arrangement, the landlord aims for a 10 percent return on investment, "based on the fair market value of the property."
Here's his example: "If my practice building was worth $1 million, then at 10 percent I would basically pay $100,000 in rent per year, divided by 12 and that would become my monthly payment," he says.
Monthly payment to yourself. Enjoy.
Watch this video for more.
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