FAQ

 

THE IMPORTANCE OF REPRESENTATION

HOW MUCH DOES IT COST TO HIRE AN AGENT?

If you are acting as a healthcare provider (tenant or buyer), you should never pay a dime for representation. In both residential and commercial real estate, the industry standard is for landlords and sellers to pay commissions to both their agent and the buyer’s or tenant’s agent.

Don’t be taken advantage of by so called “negotiators”, “consultants”, or “attorneys” who try and charge you thousands of dollars to perform the services that a qualified and well-trained, healthcare real estate agent will handle for free AND… with much better results.

SHOULD I EVER PAY A “NEGOTIATOR” OR “ATTORNEY” TO BE MY AGENT?

Absolutely NOT! You should never pay anyone to be your agent. While you should always have an attorney in every transaction, the attorney should not be finding properties or negotiating economic or business deal points, any more than your agent should not be drafting legal language. The best attorneys won’t try and be a real estate agent. Likewise, the best real estate agents won’t even consider drafting legal language or telling you that they can be your attorney.

Don’t even consider having an attorney be your real estate agent. Don’t be, taken advantage of by out of state or even out of country attorneys who try and charge thousands of dollars to act as a “negotiator” or who try and replace your real estate agent.

IS THERE A REAL DIFFERENCE BETWEEN RESIDENTIAL REAL ESTATE AND COMMERCIAL REAL ESTATE?

There is a huge difference between residential and commercial real estate. The best residential agents wouldn’t even consider doing a commercial transaction and the best commercial agents don’t dabble in residential either. Each sector has a very different approach to the market and commercial real estate has dozens of additional business and economic considerations that residential real estate does not have.

There are expert residential agents and expert commercial agents… but if you find an agent that says they do both, move on to find an agent who only does one or the other.

WHAT ARE THE MAIN BENEFITS OF HIRING AN AGENT?

Saving dozens of hours of valuable time. Avoiding costly pitfalls, complications and delays. Saving a substantial amount of money. Obtaining significant concessions. Ensuring your interests are always first and protected. Giving you peace of mind that you are in the best property and achieved the most favorable terms possible.

DO I NEED TO ALSO HIRE AN ATTORNEY?

Absolutely. Lease and purchase contracts are legally binding documents. You receive the benefit of occupying and / or owning the space or building, and with that benefit, comes obligations of what you have to do to maintain that occupancy or ownership.

When looking for an attorney, your real estate agent should be able to give you the names of several attorneys that you can interview, to determine who can offer you the best combination of value, protection, price, etc.

In a real estate transaction, it is imperative that your attorney specialize in real estate, contract and business law. Just like you don’t want a dentist performing orthopedic surgery, you don’t want an attorney who generalizes or focuses outside of real estate, trying to be a real estate attorney. In that case the results are typically unwanted exposure or an attorney that will frustrate the owner or seller by asking for things that are completely unreasonable. Additionally, it will typically cost you a significant amount more than it would have if you worked with an attorney who understood real estate law.

WHY WOULDN’T I JUST TRY AND DO MY OWN NEGOTIATING FIRST, AND THEN BRING IN AN AGENT IF I NEED ONE?

Unfortunately, many tenants and buyers try this approach, only to discover they are not sure if the property or space really is the best location or option for them… and more importantly, they are not sure they are receiving the best possible terms.

This isn’t much different than asking a healthcare provider, “how about if I try the procedure on myself and then just call if I get into trouble”. While this might seem a little more exaggerated, the results of messing up a commercial real estate transaction, choosing a property that wasn’t the best option or missing a key evaluation such as purchasing vs. leasing, etc., can cost you tens to hundreds of thousands of dollars.

It’s not like buying the wrong type of gloves or overpaying for supplies, where you can correct the wrong purchase next month. In commercial real estate, you typically only get one chance at negotiations every 5, 7 or 10 years. Making a mistake is very costly… in addition to dozens of wasted hours of your valuable time.

Bringing in an agent at any time in a transaction is better than going it alone. However, the longer you wait and the more you try and accomplish on your own, the harder it is for your agent to undue mistakes and expedite the transaction. Your agent would need to undo any communication errors you potentially made, begin the process over from where it should have been at the beginning and navigate a seller, landlord or listing agent who is probably frustrated at that point of a transaction.

You can save yourself a lot of wasted time and energy by hiring the most qualified representation you can find. Then, let them direct the process and achieve the most favorable results possible.

HOW MUCH MONEY COULD I SAVE WORKING WITH AN EXPERT AGENT?

Tens to hundreds of thousands of dollars. If your lease payment is off by even a small amount of money, it can add up to a significant loss of money over 10 years in unnecessary, higher payments. Likewise, if you don’t receive the proper amount of build out period, free rent period, tenant improvement allowance and more, you can leave the same amount of money on the table.

On a positive note, if you are properly represented, fully understand all your options and execute on a game plan that is designed just for your practice, you can save tens to hundreds of thousands of dollars… and equally important, have peace of mind that your interests were always first and protected.

WHAT IF MY ATTORNEY OR CONSULTANT WANTS TO HANDLE THE REAL ESTATE NEGOTIATION?

Short answer, don’t let them. Communicate that you want their help in the area that they specialize in but the key to achieving the best terms possible is having each partner on your team perform the task and responsibilities they are most qualified to perform.

Let your consultant be the consultant and your attorney be the attorney. Likewise, your agent should never try to be an attorney or another key partner on your team.

HOW DO I ENSURE I’M NOT FOOLED BY A LANDLORD AGENT WHO TELLS ME THEY SPECIALIZE IN HEALTHCARE TENANTS AND BUYERS… BUT REALLY IS A LANDLORD AGENT IN DISGUISE?

Always ask any agent you interview these questions:

  • How many landlord listings do you have? (if the answer is any… move on and get an agent that doesn’t have conflicts of interest and ONLY represents tenants and buyers)
  • What percentage of your deals are you representing ONLY the tenant or buyer?
  • What percentage of the clients you exclusively represent are healthcare providers?
  • Do you list any healthcare professionals on your experience page where you were also the listing agent for the landlord or seller? (if so… they are misrepresenting their experience in your first meeting, as an honest agent wouldn’t claim to have helped or represented a healthcare provider if they also had a contract with the owner)

The answers to each should be: no listings… I only represent tenants and buyers… who are healthcare related… period. Don’t let a landlord agent masquerade as a tenant and buyer agent. Often times, you’ll find a landlord agent who gets 90% of their income from representing retail landlords or sellers who pretend they are specialized. Ask the right questions and you can ensure you don’t suffer at their hands and end up with dramatically inferior terms.

HOW DO I KNOW IF THE BUILDING OR PRACTICE AGENT WORKS FOR ME OR THE OWNER/SELLER?

Regardless of what anyone tells you in any industry… you can’t fairly represent two opposing parties. Both parties may have a desire to sell and purchase a practice, real estate or another asset but if one side’s desire is to get the lowest price and the other side’s desire is to get the highest price, they are competing and opposing interests. Ask a few simple questions:

  • Do you have a contract with the seller or with me only?
  • Before we got to this point, have you performed any work for the seller?
  • If I don’t buy this, will you still be working for the seller?
  • Can you legally give me any advice that would give me an advantage over the seller, without telling them?

As you can quickly understand, only an agent who exclusively represents your interests can provide you with truthful answers to these questions that you would want to hear. There is nothing wrong with the seller of a building or practice having representation. If you were selling a building or practice, you would want to hire representation also. If you are acting as a tenant or buyer, it is imperative that you have representation that only represents your interests.

CAN THE LANDLORD OR SELLER’S AGENT ALSO REPRESENT ME?

100% NO. Regardless of what anyone tells you in any industry… you can’t fairly represent two opposing parties. Both parties may have a desire to sell and purchase a practice, real estate or another asset but if one side’s desire is to get the lowest price and the other side’s desire is to get the highest price, they are competing and opposing interests. Ask a few simple questions:

  • Do you have a contract with the seller or with me only?
  • Before we got to this point, have you performed any work for the seller?
  • If I don’t buy this, will you still be working for the seller?
  • Can you legally give me any advice that would give me an advantage over the seller, without telling them?

As you can quickly understand, only an agent who exclusively represents your interests can provide you with truthful answers to these questions that you would want to hear. There is nothing wrong with the seller of a building or practice having representation. If you were selling a building or practice, you would want to hire representation also. If you are acting as a tenant or buyer, it is imperative that you have representation that only represents your interests. This is the exact same answer for: CAN THE LANDLORD OR SELLER’S AGENT ALSO REPRESENT ME?

 

KEY CONSIDERATIONS

WHEN IS THE IDEAL TIME TO DISCUSS MY COMMERCIAL REAL ESTATE NEEDS?

As a general rule, you should contact an agent 24 months prior to your upcoming transaction to start establishing your course of action. You are always better to plan ahead and be a little early instead of too late, as timing plays a major role in identifying the top property options available and securing the best possible terms.

Because real estate is typically the 2nd highest expense for most practices, it’s important to give yourself enough time to create a thorough game plan to execute. Certain transactions can take a significant amount of time to complete, such as: ground-up construction. Alternatively, if you are considering a new or additional office, buying a practice or need more space immediately, simply start the process as soon as you can.

HOW DO I KNOW IF I SHOULD LEASE OR PURCHASE?

The short answer is that you should start by understanding every option available to you: all the options that meet your requirements to lease and purchase… in both office buildings and retail locations. Then, your agent should provide you with a detailed purchase vs. lease analysis that fully breaks down all the economics of each option.

Finally, they should walk you through all the additional benefits and obligations of your top two or three options and help you to make the best economic and emotional decision you can to position your practice for the highest amount of success, both now and through the next 10 to 20 years.

WHY DO NEW TENANTS GET BETTER DEALS THAN EXISTING TENANTS ON RENEWALS?

The short answer is they don’t, unless you have poor representation and don’t fully understand all your options. It is easy for a landlord to take advantage of a tenant who attempts to go it alone, or who hires an unqualified agent, or who doesn’t fully understand all their options or the market, and doesn’t have the correct approach. They would love to charge you more than they should and give you less concessions than a brand-new tenant would receive.

It’s actually a huge insult to you but one that most landlords have no problem dishing out, if you’re not willing to take a stand and ensure that your interests are protected.

A trained and experienced healthcare real estate agent will ensure you have the best opportunity to receive terms that are as competitive as they can be…. Certainly, as competitive as a new tenant would receive!

WHAT ARE THE DIFFERENCES BETWEEN OFFICE VS. RETAIL VS. MOB (MEDICAL OFFICE BUILDING) SPACE?

While there are many classes, variations and vintages of office, retail and MOB space, the main comparisons typically boil down to: window lines and natural light, signage and exposure, cost, maintenance performed by the landlord vs. the tenant, building amenities, synergy or diversity of other tenants, parking, access and more.

For Class A properties, retail spaces often cost more, provide more exposure and signage, synergy of other diversified tenants who drive traffic to the center, easy access and more. Office spaces often provide more natural light and better window lines, lower cost, a traditional business setting, more assistance and maintenance from landlords, etc. MOB space provides a building or campus that is dedicated to healthcare professionals and often creates strong referral partners, synergies from healthcare related tenants, increased supply of janitorial and utility services, and often, other healthcare related amenities.

When considering if your practice should stay or locate in an office vs. retail space vs. MOB space, your agent should help you fully evaluate all your top options, then provide a detailed breakdown of the pros and cons of each top property option and how they would positively or negatively affect your practice.

HOW DO I FIND OTHER KEY PLAYERS TO COMPLETE THE TEAM FOR MY NEW PROJECT?

In nearly every market in the country, there are top performers in every category of partnership required to build a new office or project. These partners include, healthcare specific: real estate agent, lender, attorney, architect, general contractor, CPA, consultant, equipment and supply specialist, IT provider, marketing and more.

If you are starting with an expert commercial real estate agent who specializes in healthcare real estate, they will be able to provide you with a detailed list of partners to interview and choose from, who can ensure your project starts AND finishes as smooth as possible.

HOW CAN I ENSURE THAT I GET THE BEST TERMS POSSIBLE?

Follow these simple steps: Hire an agent that only represents healthcare tenants and buyers. Make sure you fully understand the market and all your top property options. Evaluate both lease and purchase options; office vs. retail vs. MOB, etc. Evaluate detailed economic comparisons. Hire an excellent real estate attorney. Allow your agent to create a custom strategy for your next real estate transaction and then help you execute.

IS AN OFFICE CONDO A GOOD PURCHASE OPTION?

An office condo can be an excellent purchase option, especially for buyers who are interested in purchasing a space now vs. developing or building their own property, or who have a smaller size requirement. Those requirements could look like: 1,000 to 8,000 SF; or someone who want the benefits of owning but doesn’t want to take on all the ownership and management responsibilities of running and managing a property.

Most condo projects have an owner’s association that are professionally managed and handle the many vendors needed to properly maintain a commercial project, such as: exterior and interior maintenance, landscaping, janitorial, parking lot and roof maintenance, snow removal, fire and security monitoring, inspections and many more. They will typically handle the financial accounting and budgets for the property as well.

Buying a condo can be a great investment that can save a lot of time and money getting into, when compared to traditional purchases or ground-up construction. Likewise, you need to ensure the owner’s association is run properly and sound financially. An expert agent can help you fully explore this option and ensure you are making the best decision for your practice.

HOW LONG DOES NEW OR GROUND-UP CONSTRUCTION TAKE TO COMPLETE?

While the actual construction process may only take 6 to 8 months to fully complete a building, it’s the additional 6 to 12 months before the construction process starts that comprises the full schedule for new or ground-up construction.

For most markets and building jurisdictions, the fastest new construction process still takes over a year. However, the average new project takes 18 months to fully complete from first meeting to seeing patients in your new office.

Ground up construction allows for the most precise and specific layout, ergonomics, finishes and style you can possibly choose… but with those benefits, also comes the longest lead time and typically, the most expensive project. All of which can be 100% worth it, but you always want to approach every transaction with a full understanding of timing, deadlines, procedures and cost.

WHAT IS THE AVERAGE LEASE RATE IN MY AREA / WHAT SHOULD I BE PAYING?

That question has many variables. To start, how many square feet do you have or need? Retail, office, MOB or Hospital Campus? Downtown, city, suburban or rural? New lease or renewal? Do you need a significant amount of money or is your space in near perfect condition? When does the new lease start? And on and on the questions come…

Thankfully, we have an outstanding and completely free process to help healthcare professionals fully understand what they should be paying and what they can expect to receive on their next commercial real estate transaction. Click here to start your free Lease or Purchase Evaluation and we’ll make sure you get all your questions answered.

HOW IMPORTANT IS REAL ESTATE TO MY PRACTICE?

For most healthcare practices, real estate is the 2nd highest expense behind payroll over a career. While payroll is minimally negotiable, real estate is 100% negotiable. And with it, comes the ability to increase and maximize profitability in a manner that typically exceeds managing or negotiating any other top expense in your practice.

The difference between a properly or poorly negotiated real estate transaction can cost or benefit you tens to hundreds of thousands of dollars over just a ten-year period; let alone your career.

With this much at stake, hiring expert representation and maximizing every real estate opportunity is paramount.