DaVita Real Estate for Sale: Ways to Invest in Dialysis Centers

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DaVita Real Estate

The healthcare industry has multiple opportunities for medical entrepreneurs to invest in healthcare clinics, including dialysis centers. The stakes for new dialysis centers tend to be high compared to several other businesses. The lives of patients who patronize your dialysis center are literally in your hands, so a willingness to first prioritize patient needs is essential. In this article, you’ll find all you need to know about investing in a dialysis center and why we recommend DaVita real estate for sale. 

Conducting a Feasibility Study 

One of the first steps you’ll need to take is to get a CON (Certificate of Need) from the health association in your state. The CON helps coordinate medical services within the community and manage the construction costs of a healthcare facility. 

But before applying for a Certificate of Need, it’s advisable to conduct a feasibility study to know how profitable dialysis center investment is in your community. You can minimize startup capital by leasing dialysis equipment. 

A dialysis center startup should have about 18 to 24 breakeven dialysis patient load. If you’re not sure that a DaVita real estate for sale can attract more than a dozen patients quickly, you should give the investment a second thought. 

Exploring Franchising Options

If you’re looking to start a dialysis center, it’s advisable to check for any reputable franchise opportunities available within your community that might make things easier. The chances of your business surviving increase if you buy a franchise like DaVita dialysis centers for sale and benefit from their previous work and lessons learned. 

Finding the Best Dialysis Center

1. Choose a Busy Location

Three factors determine a busy dialysis center, and they include:

Number of Patients

If a DaVita Dialysis real estate property has over 100 patients, each generating a revenue of about $50,000, the center will get over $5 million in revenue annually. It’s even better if the center has a rent-to-revenue ratio below five percent.

Number of Hours

The rent a dialysis center pays depends on the number of hours it opens — the longer the opening hours, the less rent. For instance, a 12-hour location pays twice the rent of a place that opens 24 hours/day. 

Facilities that open 24 hours/day can maximize the funds invested in dialysis equipment (though they pay more for labor), requiring more patients to justify the operation costs. Some dialysis centers for sale are open only three days per week. Investors should think twice before buying such a location. 

Occupancy Rate

It’s the percentage of dialysis equipment in operation during work hours. To obtain the occupancy rate, divide the number of patients by the center’s capacity.

If a dialysis center has 25 dialysis machines and opens 12 hours daily and six days weekly, its capacity is (2x3x25) = 150 patients. 

Each machine can treat three patients within 12 hours since each process lasts four hours, and a patient needs a machine three times per week. Hence, NNN DaVita dialysis stores with 105 patients operate at 70 percent of their capacity, which isn’t a bad figure.

2. Choose a Center with Few Years Remaining on its Lease

Most new dialysis centers have about 10 to 15 years of lease and offer a five percent cap with a couple of landlord responsibilities. They usually offer ten percent rent bumps every five years or annual rent bumps. The tenant will also have several five-year options. Hence, investors get a better cap from dialysis centers than ground leases for fast food restaurants. 

When the lease is one or two years left, the cap usually increases to about eight percent as most investors will be concerned their tenants won’t renew. Choosing a dialysis center with one or two years left is an excellent way to profit from your investment, knowing there’ll still be a renewal. 

You’ll have an advantage as tenants rarely move or close after spending loads of money installing water filtration systems, backup power supply, and new dialysis machines. Moving the business to another location requires setting up another dialysis center at the new place running the existing one. Building the new center from scratch can take up to two years. 

Besides, the tenant will also face the issue of what to do with the machines in the old location. Hence, tenants hardly move and will only consider closing down if the facility is too dilapidated and unsafe or two centers are too close together. 

Investment Risks

Like every other investment, dialysis center business involves some level of risk, some of which include:

1. More Patients Prefer Home Dialysis 

Most patients who choose home dialysis usually have better health results since they undergo dialysis therapy about three to six times per week compared to three times per week in centers. 

But home dialysis requires the patient to have a partner at home and about two to eight weeks of training. Currently, just about 10 percent of patients prefer home dialysis. A substantial increase in this number may reduce the demand for dialysis centers, causing a decrease in the number of patients and rent in these facilities. It can create pressure to cut down the rent price. 

2. Decreasing Rent During Lease Renewal 

Although dialysis centers generate lots of money from insurance patients, federal law requires insurance organizations to provide coverage for only 2½ years. Then, Medicare takes over. In 2015, DaVita generated about $62,387 revenue per patient, which reduced to about $51,500 in 2019.

This change is mainly due to Medicare’s reduction in reimbursement. It pressurizes tenants to reduce their operating expenses. Hence, DaVita might request rent concessions during renewal regardless of the pre-set rental rate in the lease. 

DaVita real estate investors can minimize this possibility by ensuring the rent tenants pay isn’t higher than the market price within the area they’re looking to invest in. A broker can further help in this regard. 

Why Should You Invest in Davita Real Estate for Sale? 

With a $9.2 billion market capitalization, DaVita is one of the best dialysis services providers in the US. DaVita real estate for sale begins at $1.5 million with about 5.5 percent to 7 percent cap rates. The company offers corporate-backed leases for 10 to 15 years and rent increments of 5 to 10 percent every five years, giving investors the greatest advantage.

 

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