What Rent Should a Subletting Dentist Pay?

I have a dentist who sublets space in my office. We share the days equally and we share disposables but nothing else. I’m not sure what a reasonable rent for this type of arrangement should be. Does anyone have experience with this?

5% of revenue may be the benchmark for space rent, however, it sounds like you own all the equipment, furniture, computers, etc., therefore the 5% will not cover the use of all those items.

You need to start with what it is you pay for the space that would be equally shared: rent, utilities, cleaning & maintenance, security, condo fees, water, cableinternet, etc.

Then consider any other expenses for either the facility & equipmentfurniturecomputers that you also pay. things like property insurance, premises liability insurance, property taxes, equipment repairs & maint, etc.

You should be able to come with a pretty accurate annual number.

This is YOUR annual operating cost to rent that space & own that equipment.

That’s the baseline.

Here’s a question, should you add a premium to this amount since you’re the one on the hook for the lease? I say yes, maybe 10-20% more…

Here’s the difficult part, determining an amount that covers the rent for the hard assets they use like the equipmentfurniturecomputers and one method I’ve seen is to simply take the total purchase cost of those items & divide by 10 to arrive at an annual rental rate.

Let’s say the cost of those assets is $200,000, divide by 10 givens you $20,000 per year, or approx. $1,500.month. Is it a perfect method? No, lets face it, it’s all negotiable. Maybe 15 years is a better divisor.

Don’t sell yourself short whatever you do.

This post first appeared on DentalTown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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