Maximizing Dental Real Estate Value Through a Portfolio Sale

Portfolio sales can allow dentist-owned DSOs to achieve much higher sale rates than they perhaps originally think.

By Brady Frank, DDS

For years, dentists sold their practices for pennies on the dollar. Recently, dentists have been getting higher pricing from dental service organizations (DSOs), but with constricting terms and not in alignment with private practice. A new trend for dentists is to band together, creating 100% dentist-owned DSOs. Doing so has allowed them to achieve much higher multiples of earnings before interest, taxes, depreciation, and amortization (EBITDA) on the valuation side of things, and significantly better terms allowing them to practice in the same way, debt-free, with wealth in the bank. The same phenomenon is occurring as it relates to dental real estate. Dentists "in the know" have found opportunities to gather their buildings together as a portfolio, making them more attractive to institutional buyers, achieving a much higher sales price, better tax advantages, and better terms.

How Does a Dental or Healthcare Real Estate Portfolio Sale Work?

It’s straightforward. A buyers club allows purchasers to buy in bulk and receive supply discounts. Like dentists with real estate, sellers can do the same thing to achieve higher sale prices. With a portfolio sale, properties are clustered together and sold to the wealthiest buyers like real estate investment trusts (REITs), private equity, or institutional investors. This allows sale prices to be substantially higher than if that building was sold to another dentist or individual purchaser. It also provides for a reduced broker fee, reduced closing costs, and reduced legal costs associated with purchase and sale agreements and leases. If you have owned your building for over five years, you could have a great deal of equity tied up in it, which could be earning a much greater return elsewhere. You also could have debt on your property which would be eliminated through the portfolio sale strategy.


This is an example of an analysis of a 100% dentist-owned portfolio that will go to market soon. Note the increase in the sale price in relationship to the rise in net operating income (NOI). Additionally, note the increase in sale price based on the leases in place that are synchronized within the portfolio. When the group sells altogether to an institutional investor, all dentists make significantly more money on their real estate investment.


These are the office space locations in the portfolio sale mentioned in this article. Licensed commercial real estate brokers specializing in portfolio sales achieve maximum sale prices.

Tax Benefits

For example, one such portfolio of dental practice properties goes to market in a few weeks. This portfolio sale involves over 80 dental buildings throughout the U.S. and is projected to fetch a value that is multiple times higher than any of the individual buildings that could be sold on their own.

Portfolio sellers have significant tax benefits, including 1031 tax-free exchanges and 453a installment sales, which mitigate the potentially high tax bill. Once a deal goes through, there are opportunities to purchase other properties at the low end of the value chain and turn around in about 12 months to start the process with another portfolio sale to reap very favorable profits.

Cap Rate

I have been investing in this manner for over 20 years and my general rule is that, before I purchase an individual healthcare property, I would like that property to be worth at least 200% more within a 12 to 24-month period based on standard sale-leaseback and portfolio methodologies with market cap rates and 85th percentile leases. The value of a property equals the net operating income or profit from the property's rent divided by the cap rate. Cap rate is a term that relates to the overall market and individual property conditions. The lower the cap rate percentage, the higher the property's sale price. In the case of a portfolio sale, the cap rate is compressed, which means an increased price for every property in the portfolio.

Taking the Next Step

If you think your dental real estate is worth $750,000, there is a good chance it is worth over $2M through a portfolio sale, allowing your practice to lease back from the new owner of the real estate. If some of these terms are foreign, don't worry. Visit to watch a webinar replay, which will guide you through all these strategies in greater detail.


Author: Dr. Frank is an active commercial real estate investor focusing his time on helping dentists achieve the highest exit strategy and profit from the existing owned real estate. Dr. Frank has been a pioneer in 100% dentist-owned DSOs (also referent to as D-DSOs) and has conglomerated a group with an estimated value of over $1B. He is the author of the book Transition Time, DDSO Strategies and Multiple Streams of Passive Dental Income. Dr. Frank has a passion for helping private practicing dentists win financially instead of corporate entities. He has assembled the most extensive portfolio of 100% dental real estate in the US, achieving much greater sale prices and terms for all dentists involved.

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