Cautions leasing to dental hygiene clinic?

Question

My husband and I are working on renovations of our 2nd rental property. We purchased a 1800s grange hall and are converting it into three apartment spaces. The building is right in downtown, a prime location, and a local couple reached out asking if we'd consider renting the space for their new dental hygiene practice. They are working through their business plan to see if they can afford the proposed rent - I'm curious if anyone has had experience renting out a dental space? We'd initially planned on all 3 units being residential, so we're considering our options and the benefit of a long term lease if this works out vs additional risks/expenses. My husband is a contractor and we've already talked about all the equipment requirements and changes he'd need to make if this worked out. Any additional insurance considerations? It's a unique use case so I figured I'd check to see if anyone has lessons learned.

Thanks!

Laura M

Thanks!

Laura M

James Jones · Answer

Dental and medical tenants can be excellent long-term tenants, but the risks are very different from residential, so it’s smart you’re asking upfront.

A few key cautions I’ve seen matter most:

1. Zoning & Use

Confirm medical/dental use is explicitly permitted. A future zoning or use issue can kill value fast if you ever need to re-tenant the space.

2. Build-Out Risk

Dental spaces are highly specialized:

Plumbing (suction, water lines, drains)

Electrical (dedicated circuits, equipment loads)

X-ray shielding requirements

If they leave, conversion back to residential can be costly unless the lease clearly allocates build-out responsibility and restoration.

3. Lease Structure Matters

Strongly recommend:

Long initial term (7–10 years)

Personal guarantees, especially if they’re a new practice

Clear language on who owns improvements at lease end

Triple-net or modified gross to avoid surprise expenses

4. Insurance

You’ll want:

Higher liability limits

Tenant-carried professional liability and malpractice

Clear indemnification language

Your insurer should explicitly approve the use, or you risk coverage gaps.

5. Exit Liquidity

Medical tenants are stable, but the buyer pool is smaller if you ever sell. That’s fine if the rent supports it, just don’t price it like a pure residential asset later.

Big Picture

If structured correctly, this can outperform residential with:

Lower turnover

Longer leases

Fewer tenant headaches

But the lease needs to be written assuming they might leave, not assuming they’ll stay forever.

If you protect the downside first, the upside can be very attractive.

Laura Mrazik · Answer

This is incredibly helpful, James.  Thank you so much!

All the best,

Laura