Does Your Building Change Your Practice's Value?

If you own the building your veterinary hospital operates in, you have been building two assets at the same time: an operating business and a piece of real estate. That is why "what is my practice worth?" rarely has a single answer.

The right number depends on how the building is treated alongside the practice. A complete veterinary practice valuation separates the business from the property, then shows how the two work together.

Two Assets, Two Values

The operating practice is the business itself: goodwill, client relationships, your team, your systems, your cash flow, and your equipment. The real estate is the land and the building. In most transactions these are valued separately, because they typically involve different buyers, different appraisal methods, and different financing.

The SBA's guidance on closing or selling a business makes the same point. It advises using a business valuation to set a value before you market to buyers, and it says to accurately value all property and real estate tied to the business.

It also lists three common methods: the income approach, which looks at projected earnings and risk, the market approach, which compares your business with similar ones that were recently sold, and the asset approach, which subtracts liabilities from the value of assets.

Equipment sits in a gray area. It belongs to the operating business, but its value depends on age, condition, and remaining useful life, and well-functioning equipment is often already reflected in the earnings it helps produce. A careful valuation looks at all of this in context rather than simply adding it on top.

How Real Estate Shapes Your Valuation

The building touches your valuation in several ways:

• Rent is the lever: What the practice pays, or does not pay, for the space affects reported earnings
• Deal structure matters: You may sell both, sell the practice and lease the building, or keep the building as an income stream
• The buyer pool changes: Some buyers want to own the property, while others prefer to lease
• Financing differs: Lenders look at property and goodwill differently, and the SBA's 7(a) loan program can be used to acquire or improve real estate

The Fair-Market-Rent Question

Owners often pay below-market rent to themselves, or no rent at all. That makes earnings look better than a buyer will experience once they pay a real lease. The reverse can also happen: rent above market can make a healthy practice look weaker than it is.

For that reason, analysts typically adjust rent to a fair-market figure, so the practice is judged on its own performance and the building is judged separately.

Three Common Paths for the Building

Every owner's situation is different, and there is no single right answer. Most sales follow one of these paths:

1. Sell the practice and the building together: This is a clean exit with one buyer and one closing, though the buyer must be able to finance both
2. Sell the practice and lease the building to the buyer: You keep rental income and a tie to the property, along with a landlord's responsibilities
3. Sell the building separately: You receive cash from the property, and the practice leases the space going forward

Each path changes your cash at closing, your ongoing income, and your tax picture, so talk with a CPA and an attorney before you decide. If you are mapping out options, selling your practice is easier when the real estate decision is made early rather than during negotiations.

Why Many Valuations Miss the Building

Some valuations cover only the operating practice, even though the building may represent a large share of an owner's net worth. That leaves owners without a clear view of their total equity, or of how structure choices change the outcome.

A complete picture addresses both, so decisions about timing, structure, and negotiation start from real numbers instead of assumptions. Without both figures, an owner can end up comparing offers on incomplete information, such as a higher headline price that quietly shifts rent and property obligations onto the seller.

This kind of practice value and exit planning also shows which factors you can strengthen before you sell.

Getting Your Numbers Ready

A little organization now saves time and leverage later, and most of it is simple document gathering:

• Gather leases, mortgage statements, property tax bills, and any recent appraisals
• Document the rent the practice pays for the space, along with the lease terms
• Keep practice expenses and property expenses separate in your books
• Plan your timeline early, since property decisions affect deal structure
• Bring in a CPA and an attorney before you list

Clean books matter here, too. Buyers want to see consistent numbers, which is why the three-year P&L rule is worth understanding, and the people side of a sale deserves the same attention, as this guide on preparing for a sale without disrupting your team explains.

Frequently Asked Questions

Is the building included in a veterinary practice valuation?

Usually the practice and the property are valued separately, though a complete picture addresses both.

Should I sell the building with the practice?

It depends on your retirement goals, your taxes, and the buyer. Selling both can simplify your exit, while keeping the building can provide ongoing income. Compare the options with your advisors before you commit.

Does the rent I pay myself matter?

Yes. Buyers and analysts typically adjust rent to market when judging earnings, so a below-market or zero-rent arrangement can overstate how the practice will perform for a new owner.

Does owning the building raise my practice's value?

Not automatically. The building has its own value, which is assessed on its own terms, and it is just one of the issues covered in the biggest mistakes owners make before selling.

Get a Veterinary Practice Valuation That Includes Your Building

At Veterinary Solutions Services, we provide certified valuations led by a certified exit planning and valuations specialist, and unlike many providers, the process includes your real estate, with three years of fair market value updates. Schedule a free Insight Call to find out what your practice and your property are really worth.