WP 86 | Most Common Mistake Made When Purchasing or Leasing Office Space with Colin Carr
Common Mistakes Therapists Make When Buying Property
In the latest episode of the Wise Practice Podcast, Whitney Owens discusses common mistakes therapists make when purchasing or leasing office space. Special guest Colin Carr, founder and CEO of Carr, shares valuable insights and practical advice. Here are the key takeaways:
1. Timing is Crucial
One of the biggest mistakes therapists make is not knowing when their lease expires. Timing your lease negotiations correctly can make a significant difference. Starting too late puts you in a compromised position, while starting too early can blow your posture. Ideally, begin the process around 12 months before your lease expires.
Tip: Mark your lease expiration date on your calendar and set reminders well in advance.
2. DIY Approach Can Be Costly
Many therapists try to handle lease or purchase negotiations themselves, thinking they will save money. However, this often leads to inferior terms and higher costs. As the tenant or buyer, you are not responsible for paying commissions—landlords or sellers cover those costs. Therefore, using a professional broker can save you time and money.
Tip: Hire a specialized broker who understands the healthcare real estate market to negotiate on your behalf.
3. Lack of Strategy and Posture
A successful real estate transaction requires a solid strategy and proper posture. Unlike residential real estate, commercial real estate negotiations are more complex and less transparent. Comparing multiple properties and negotiating with multiple landlords is essential to get the best terms.
Tip: Work with a broker to explore all your options and negotiate with multiple landlords to create competitive offers.
4. Relying on Peer Information
Therapists often rely on information from their peers about lease rates and terms. While networking is beneficial, this information can sometimes be misleading and not reflective of the best possible terms available.
Tip: Base your decisions on comprehensive market analysis rather than solely on peer advice.
Tips for Successful Property Transactions
Know Your Lease Expiration Date
Ensure you know exactly when your lease expires and start planning your next steps at least 12 months in advance. This allows ample time for negotiations, searching for new properties, and making any necessary arrangements.
Utilize Professional Brokers
Engage a professional broker who specializes in healthcare real estate. Their expertise and market knowledge will help you secure the best terms and avoid costly mistakes.
Develop a Strong Negotiation Strategy
Work with your broker to develop a negotiation strategy. Compare multiple properties and get competitive offers from different landlords to ensure you are getting the best deal.
Focus on Your Practice’s Needs
When considering new office space, think about your current needs and reasonable growth expectations. Avoid overcommitting to a large space based on optimistic growth projections. Instead, plan for flexibility and realistic growth.
Evaluate Lease vs. Purchase Options
Consider both leasing and purchasing options. Each has its benefits, and the best choice depends on your practice’s financial health, long-term goals, and market conditions.
Conclusion
Navigating the complexities of purchasing or leasing office space can be daunting. By avoiding common mistakes and following these expert tips, you can make informed decisions that benefit your practice in the long run. If you need further assistance, consulting with a professional broker like Colin Carr and his team can provide the guidance and support necessary for a successful transaction.
For more information or to get in touch with a broker, visit Carr's website.
Join Our Mastermind Groups
If you're looking to grow your solo practice or hire your first therapist, consider joining our mastermind groups starting in July. These groups offer tailored support to help you achieve your goals. Visit Wise Practice Consulting for more information and to apply.
Final Thoughts
Taking the time to properly plan and execute your office space strategy can save you headaches and financial stress in the future. Remember, you don’t have to do it alone—professional help is available to ensure you make the best decisions for your practice.
How Can Guto Help Save Time with Payroll Processing?
Gusto is an excellent payroll processing option for therapist group practice owners due to its intuitive interface and comprehensive support. It simplifies the complex task of managing payroll, taxes, and employee benefits, which is particularly beneficial for practices with multi-state employees. Gusto’s paperless onboarding streamlines the hiring process, and its user-friendly software makes it easy for administrative staff to run payroll efficiently. Additionally, Gusto’s responsive phone support ensures that questions or issues are promptly addressed, allowing therapists to focus more on their clients and less on administrative tasks. If you sign up using this link, you will get a $100 sign-on bonus!
Guest Resources
Carr - CARR is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers
Links and Resources
Looking for support and connection: Join the Wise Practice Community
Learn More about Whitney Owens Consulting
Connect with Whitney Ownes on Instagram
Connect with Whitney Ownes on Facebook
Check the podcasts on the PsychCraft Network: PsychCraftnetwork.com
Podcast Production and Show Notes by Course Creation Studio.
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WP Template June 2024
[00:00:00] Whitney Owens:
[00:00:03] Whitney Owens: Hi, I'm Whitney Owens. I'm a group practice owner and faith based practice consultant. And I'm here to tell you that you can have it all. Want to grow your practice? Want to grow your faith? Want to enjoy your life outside of work?
[00:00:16] Whitney Owens: You've come to the right place. Each week on the Wise Practice Podcast, I will give you the action steps to have a successful faith based practice while also having a good time. Now let's get started.
[00:00:29] Whitney Owens: Hello friends. And thanks for listening to the wise practice podcast. We are on episode number 86. So we're talking about common mistakes that are made when purchasing office space. Look. I needed this episode months ago, so I'm really glad to be giving it to you now. And in the future, I am going to record an episode, a solo show at some point about purchasing office space and all the ups and downs that I encountered in that.
[00:00:55] Whitney Owens: So I'm looking forward to that. But today you're going to be hearing all about mistakes that are made. And so this is not just about buying space. It's also about leasing space. And I was amazed. What Colin brought to the table on the things that can happen when you're doing a lease. So you're looking forward to a great episode before we get into that.
[00:01:13] Whitney Owens: I just wanted to kind of say, welcome to summer. Like, we are here. I am actually recording this here at the end of May and happy that May is about over because I'm really looking forward to the slower pace of summer. I don't know what it's like for you. But for me, the client load dips just a little bit and I'm able to go on a few vacations, have more time with my kids.
[00:01:33] Whitney Owens: So it's nice when things slow down. The other thing I love about that is it's the perfect time for me to work on my business because things are not as needy. My team doesn't need so much from me. The clients don't need so much from me. And so I'm able to kind of slow down and work on my systems and processes in my practice.
[00:01:51] Whitney Owens: Sometimes when things are going at full speed, I can't really think clearly. I can't slow down enough to implement a good system for my business. So it's really nice when summer comes. So I personally think that summer is a great time to set aside a few hours every week to work on your business. So I would encourage you to be looking at your calendar, be intentional about it.
[00:02:13] Whitney Owens: Or honestly, maybe you set a few times, set some hours to go to the pool. Whatever it is, or Hey, you work at the pool, however you like to do it. Make sure that you're set inside a time settings aside time for you and for your practice. Now, maybe you're wanting to work on some things and you're not really sure next steps.
[00:02:32] Whitney Owens: Or maybe you're wanting to increase your caseload and you're wanting to be more intentional about your marketing and maybe get those service pages written that have been on your back burner for a long time, or maybe you're wanting to hire your first therapist and you haven't really known how to do that, how to get your practice ready for all that.
[00:02:47] Whitney Owens: I encourage you to get that done this summer
[00:02:52] Whitney Owens: when the fall comes, you're ready to get your practice to the next level. We do have mastermind groups going on at West practice consulting to help with that. We have 1 group specifically tailored for solo practice centers, either just starting or wanting to grow their existing practice and we have another mastermind starting for those that are wanting to hire their 1st therapists and go from.
[00:03:11] Whitney Owens: 0 to maybe 2 therapists by the end of the 6 months, both of those groups are starting in July and are right now, um, open to calls and applications. So, if you're interested in that, please go to wise practice consulting dot com slash masterminds. And I personally have a lot of things I'm going to be working on in my practice.
[00:03:29] Whitney Owens: In fact, in just a couple of weeks, I'm heading to an Airbnb for 6 days to just work on my practice. And I've never done something like that before, and I'm really looking forward to it. I'm also really going to work on my systems for the consulting business. That way everything's a lot more automated because right now I'm doing extra work really to just kind of keep things going.
[00:03:51] Whitney Owens: But once I automate everything, it's going to flow a lot better. So I would encourage you within your business to really set aside that time. To get things automated. And if you need someone to help you with that process, to speed it up, to make it easier for you, reach out to us. That was practice consulting.
[00:04:06] Whitney Owens: So happy summer y'all. And we're going to jump in the episode. I love podcasting. Cause I meet some really cool businesses. In fact, right after I did this episode, I actually referred someone who was doing a lease to the company car. I'm And she had a very positive experience. So I'm here to testify that what he says is true.
[00:04:27] Whitney Owens: They're a great company. So if you're looking to purchase, if you're looking to lease, please make sure you reach out to them. They have a lot of value. And so we're going to jump in the episode and talk about the most common mistakes that you're made when you're purchasing or leasing office space.
[00:05:00] Whitney Owens: Today on the WISe Practice podcast, I have Colin Carr, who is the founder and CEO of Carr, the nation's leading provider for commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust Carr to help them achieve the most favorable terms on their lease and purchase negotiations.
[00:05:19] Whitney Owens: He has been involved in commercial real estate for over two decades and has personally been involved in thousands of transactions. Thanks for coming on the show.
[00:05:26] Colin Carr: Thanks for having me. I appreciate it.
[00:05:28] Whitney Owens: Yeah. Well, we already have lots in common. Yeah. We kind of were talking before we got on here about your theological background, living in Colorado.
[00:05:35] Whitney Owens: So this is going to be a great conversation, but why don't you just introduce yourself to the audience here and then kind of go into a little bit of your story of how you developed your business.
[00:05:46] Colin Carr: Yeah, absolutely. Well, I grew up in, uh, in northern Michigan, lower peninsula, northern Michigan. It's about an hour south of the Mackinac Bridge, uh, when I was 20 years old, uh, moved to Colorado and I did not go to college.
[00:05:59] Colin Carr: I started working in real estate when I was 19. So I started in property management back in Michigan, uh, moved to Colorado, got into property management out here. And then I got into brokerage when I was 22 and started working for a gentleman that did mostly large national retailers. So we did Walmart, Wendy's, Blockbuster.
[00:06:17] Colin Carr: Um, we had a large coffee franchise. We had a large automotive group and I specialized in retail for a period of time. And then, um, you know, by necessity, because those deals take a long time, I started doing these little smaller industrial and office deals because I needed to supplement my, my income when I was getting started.
[00:06:38] Colin Carr: Uh, and I found that I really enjoyed working with business owners. Like it was fun to work with like a Walmart or a large national retailer. Um, but I just enjoyed working with individual business owners more. So I shifted over to office and industrial And, and just got after it. And one of my, one of my clients bought a medical building in Highlands Ranch, right across the street from where, from where you were working, like literally right across the street.
[00:07:04] Colin Carr: And he asked me if I would list it. And so I started listing this medical building. I had really not done a whole lot there in the past. And that was my entrance into medical real estate. And then, um, I, one of my first, one of my first deals was a psychologist, uh, and I did a good job for her. She ended up giving me literally 10 referrals.
[00:07:22] Colin Carr: I did 10, I did 10, uh, mental health deals after that, mostly in the Cherry Creek area. And so I was doing some landlord medical work. I was doing some tenant buyer work. And then after a period of time, uh, just had the epiphany that, that there's a huge opportunity to help healthcare providers with their real estate.
[00:07:42] Colin Carr: And really the, the pinnacle of that idea came, um, I picked up a number of other medical buildings, mostly in Highlands Ranch and Lone Tree that I was listing. And I was working at the time for, it was the largest medical REITs in the world. So for those that don't know what a REIT is, it's like you, you give them money.
[00:08:02] Colin Carr: They, they take the money and they buy real estate. So similar to like you give. Amazon or apple money in the form of stock they take it and they develop a company Or you give them money they buy real estate and then they give you distributions or dividends based upon how well the real estate does So huge landlord and I had a couple transactions.
[00:08:21] Colin Carr: I was working on Where the health care providers did not have representation. They were you know, one of them was a new deal Two of them released renewals and and the short story here is that the doctors got completely crushed in the negotiation and they didn't have a clue. It even happened. So, you know, 1 of the doctors is paying 24 dollars a square foot.
[00:08:43] Colin Carr: Uh, I'm sorry, one of the doctors was paying, uh, like in the high twenties of square foot. Plus he had a bunch of other like junk fees getting pushed back to him. And so he was actually paying like, like high twenties or low thirties. And the landlord had us go back and renew him in the thirties per square foot, and we were marketing space of the property at 24 a square foot.
[00:09:03] Colin Carr: So this guy is overpaying about like eight or 9 a square foot. It has no clue. And, and signs the lease doesn't know what's even happening. And we had a couple of those transactions where. Like, the delta between what they were paying and what they should have been paying was so significant. And I remember on one of the deals, I asked the asset manager who was out of state in Scottsdale.
[00:09:25] Colin Carr: I said, look, like, I understand getting a good deal, but this is like, this is almost like, predatory or like, egregious. Like, how much higher we're charging these people. I get the idea of making money. And, and, and he, he said to me, he goes, Colin, a market lease or a market lease rate is the most someone's willing to pay.
[00:09:45] Colin Carr: And if they're willing to pay that, that's the new market lease rate. And he literally said to me, he goes, if you won't get the job done for me, I'll find someone else who will. And he hung up the phone on me. And so now when people hear that, you know, people get upset, but let me just, let me just level the playing field for a second, because for anyone who's ever sold their house.
[00:10:05] Colin Carr: If your real estate agent says, Hey, listen, your house is worth 800, 000, but I think we can get 1. 2 million. Like you're not telling them sell for 800, 000. You're going to say, Hey, someone's wanting to pay 1. 2 for my house. I will be happy to sell my house to them. So there there's this, like this balance here of.
[00:10:24] Colin Carr: You know of what someone's willing to do and what they what they actually do like no one forces someone to sign a lease But for me, it was more this revelation of look in a residential transaction There's these comps you can see what the neighbor's paid, you know, there's a supply and demand issue Most people have a broker that helps them as a buyer but in commercial You don't know what anyone's paying in the building You don't know if the last person got a year free rent or no free rent.
[00:10:49] Colin Carr: You don't know if they're paying You know 31 a square foot or 24, it's not published information. So that's where I felt like, look, the game is not really fair. You have these healthcare providers that are running businesses, practices. They're trying to make an impact in their community. They're trying to take care of their own family, their staff, et cetera.
[00:11:07] Colin Carr: And then they get brought into these high dollar negotiations and they don't know what's even happening. And so for me, I had this revelation. There's an opportunity here. And I sat on it for almost a year until I just felt like the Lord said, it's time to go. So I literally just, every few weeks I put together new ideas, how to, how to build the business, what to do with it, And I just kept thinking about it and praying over it.
[00:11:29] Colin Carr: And then, um, after almost a year, I thought the Lord said it's time to go. And so my wife and I made the decision to start the company. And, uh, we are just over 15 years now. And we went from just Colorado, just front range, to we're now licensed in all 50 states. We have people coast to coast. Um, we have over, over 5, 000 clients that we're actively performing work for right now, and it's, that's our specialty.
[00:11:55] Colin Carr: So it's just healthcare, just tenant and buyer rep, and, and that's kind of, that's a short version of the story, even though that was a little longer than I thought.
[00:12:03] Whitney Owens: I love the story. Um, and your wife, does she do it with you?
[00:12:08] Colin Carr: Um, she is not involved in the day to day operations, but she's 100 percent involved, um, and, and standing in faith and being in unity on what we do.
[00:12:17] Colin Carr: And, you know, some of the higher, you know, higher consequence decisions or bigger decisions, um, we're, we're certainly in agreement on. And so, yeah, she takes care of our kids, takes care of our house. We homeschool both our kids. Um, and so she's involved at a high level, but not in the day to day.
[00:12:34] Whitney Owens: Yeah. Okay.
[00:12:35] Whitney Owens: Now you're going to have to apologize. I have to apologize if I have ignorance here when I start asking some of these questions. Um, okay. And so you are basically a real estate agent, right? Yeah. Okay. And so if I were to buy something here. Would you like fly here and represent me or do you do it all virtually or how does that work?
[00:12:53] Colin Carr: Um, we've got people, we have over 160 people across the country. So we've got people that are out of Atlanta that would help you or we people that like, you know, depending on how far you're in Savannah, I mean, they come out of South Carolina. We people there in Charleston, um, or Greenville Spartanburg, or they could come up from the Jacksonville.
[00:13:10] Colin Carr: So I don't have somebody in Savannah currently we will in the future. Um, but they would just, they'd either come down, go West or come North. Well, Holy smokes. Yeah. And if you happen to be like in some random place, like, let's say you were like in Northern Alaska and we couldn't get to you, we would do that deal remotely.
[00:13:28] Colin Carr: Absolutely.
[00:13:30] Whitney Owens: Man. I, I should have interviewed you six months ago.
[00:13:34] Colin Carr: Hey, that's why we're in business. People didn't know that we're in there, so.
[00:13:38] Whitney Owens: And now they do. Okay. Well, I might end up sharing with you more about my situation a minute. I literally closed on a building last week.
[00:13:45] Colin Carr: That I mean, congratulations.
[00:13:46] Colin Carr: That's awesome.
[00:13:47] Whitney Owens: Well, thank you. But I needed you to be there. Um, because, you know, these people, they take such advantage what you were saying. It was terrible. It was a terrible experience. Um, but I'm, I'm actually going to do a whole podcast on just that experience. Cause it was something very interesting.
[00:14:02] Whitney Owens: I
[00:14:02] Colin Carr: mean, what, what are the things that's, you know, that's really prevalent, unfortunately. Uh, and this is, I mean, to me, this spans every industry. It's not just real estate, but there's some really, really bad real estate brokers. There's some really bad landlords. There's some really bad sellers. Um, but there's also really bad teachers and there's really bad attorneys.
[00:14:20] Colin Carr: There's really, I mean, there's, unfortunately there's
[00:14:23] Whitney Owens: therapists, they're bad.
[00:14:25] Colin Carr: So there are really, it's, some people are, I think some people are bad because of just ignorance and just, you know, they're just lazy. It's a lack of work ethic. And a lack of professional excellence. And then some people are bad because they just don't have a moral standard or integrity.
[00:14:40] Colin Carr: And to them, you know, it's kind of no holds barred. And if they could make more money, you know, that's your fault for falling for it. Or that's your fault for not having a good attorney or a good broker. And so they will, they'll tell you things and they'll lie right to your face. I know this because I've worked for many landlords.
[00:14:56] Colin Carr: They'd say, Hey, we'll go tell them this. And I'm like, I'm not telling anybody anything. That's not true. I have no problem creating a posture and having a strategy for whatever side I'm working for. Like I'm not going to divulge confidential information, but I'm not going to tell someone something that's not true or lie to them.
[00:15:11] Colin Carr: Like, we're going to have to come up with a different strategy than that. Um, but you'll find people that will, they will say anything to, to make a dollar, unfortunately. And that's, you know, They don't, they've done it so many times to people. So how do you do that? It's like, well, it's like anything. I mean, the more you say something because pathological, you just, you enter into that realm where, you know, I'd have these landlords, they'd say things.
[00:15:33] Colin Carr: And I would, I would look at them and be like, what are you talking? That's not, that's not even close to being true. And they're like, just say it. And I'm like, no, I won't say that. So unfortunately people, people do not always operate with integrity.
[00:15:45] Whitney Owens: Yeah. Yeah. Well, so talking about pitfalls and mistakes, um, today I want to talk to you about what are the most common mistakes you see with therapists specifically regarding office space?
[00:15:57] Colin Carr: So, um, like a lot of like, like failure reels and blooper reels, like we could, we could hit quite a few, um, let me narrow it down like the top three or four. Um, and I'll hit a couple of them quickly because they're pretty self explanatory. Then I'll hit a few more in depth. Um, so one of the top mistakes that we see healthcare providers make it specifically therapist, but it's really everyone in healthcare, uh, is they don't know when their lease is expiring.
[00:16:21] Colin Carr: And they wait until it's, it's really hard to create strategy and posture. And what I mean by that is they sign a five year lease. Maybe there was some free rent for bill out, or they don't, they're not really pay attention. And a lot of times the landlords will, will run out the clock. Like you'd see in sports, like you hold the ball.
[00:16:37] Colin Carr: Our team can't get the ball and they don't have a chance to score. And so. Landlords will wait till these guys have like a month or two left in their lease and they know at that point they're not paying attention, they don't have time to move, it's inconvenient to move, and so they end up in a very compromised position.
[00:16:53] Colin Carr: Happens all the time. The flip side is you'll see health care providers that will start a transaction like two years in advance and there's no posture. Like you're locked into a lease for two years, the landlord knows you can't go anywhere, you have a personal guarantee to fulfill that commitment. And so you can start too early and blow all your posture.
[00:17:12] Colin Carr: Um, and you can start too late and have no, no strategy or posture as well. So timing is one of the most obvious ones and all it takes for you to do is just know when your lease expires. So that's one of those ones. That's very easy to rectify. Just understand what your lease says. Another one, and this is probably the most common and the most damaging, is people take the do it yourself approach.
[00:17:36] Colin Carr: And I, I always joke about this, like, if you, if you've ever seen a U Haul driving down the road, it says on the side of every single U Haul trailer, van, truck, it says move yourself and save. And so there's this mindset and commercial real estate. Well, if I do it myself, I'm going to save money. But the reality is you're not the one paying commissions.
[00:17:56] Colin Carr: You're not the seller or the landlord who is committing to pay a 3 percent or 6 percent commission. You're the tenant or the buyer. And so. This, this do it yourself idea. I'm going to, I'm going to do it myself and I'm going to save. It's like, no, you're going to do it yourself. You're going to lose 30 to 40 hours of your valuable time if you do it properly.
[00:18:15] Colin Carr: And then you're going to end up with inferior terms. You're going to actually pay more and lose a lot of concessions you could have gone after. And then you're also going to typically expose yourself to, you know, liabilities and pitfalls that you could have avoided if you had someone who was specialized.
[00:18:31] Colin Carr: And so it's this idea of like, Hey, if I do it myself, Look, if you're talking about like, you know, mowing your grass, sure. Like if you don't want to pay someone, mow your own grass and you can save money. When it comes to commercial real estate, you're not the payor of the commissions. So commercial real estate, just like residential, if you're a buyer, it's very unusual for a buyer to pay their agent a commission.
[00:18:53] Colin Carr: That's the seller's or the landlord's responsibility. And the vast majority of transactions, like 99. 9%. So, um, this idea, like I'm going to do it myself. That's a, it's a really bad game plan. And we always tell people, listen, just cause you can do something doesn't mean it's the best strategy. Like just because you can call on properties or say, send me a proposal or you can sign a lease, like that's not the success of the transaction.
[00:19:20] Colin Carr: That's the completion of a transaction, but it's probably the completion of a less than successful or a less than the best transaction. So that's a big one. And then coupled with that one, and I'm going to stop
[00:19:30] Whitney Owens: you here because I already have lots of questions for you about what you've already shared.
[00:19:34] Whitney Owens: Okay, cool. All right. This is so good. I love this information. Um, so what you just said, I think is really relevant because that's like every industry that'd be like doing your own taxes without an accountant.
[00:19:45] Colin Carr: Totally
[00:19:46] Whitney Owens: like what a waste. Um, but I want to go back to the first one, cause I'm very curious on this, the timing.
[00:19:52] Whitney Owens: So what is the right timing then?
[00:19:55] Colin Carr: Um, typically it's around 12 months. Like that's the ideal time frame because that gives you a couple months to go to market, look at all your options, figure it out. If you want to lease or purchase, if you are going to relocate and you need to build out that space. Um, you, you can't just walk into a building and start swinging hammers.
[00:20:12] Colin Carr: Like you got to go through. A architectural and engineering process. You've got to submit construction documents to the building department. They've got to then review them. They've got to give you a permit to start construction. And again, people don't realize the timelines of this, but that that whole process can take 4 to 6 months just for them to say, yes, now you can go tear it out a wall or move electrical at plumbing lines.
[00:20:37] Colin Carr: So, um, the actual construction process of most healthcare offices only takes around like six to 12 weeks. Six is if it's more traditional office space. But if it's plumbing lines and you know, like things going in the floor, like gases and stuff like that for certain types of healthcare, um, veterinary use, dental use, surgical uses.
[00:20:56] Colin Carr: I mean, that's a solid 12 to 14 week build out. And so if you've got a, if you've got a 2, 3, 4 month build out process, and then it might take four to six months before they say, yes, you can swing a hammer. You got to start that process about 12 months in advance. And then there's a couple of exceptions there.
[00:21:13] Colin Carr: If you start at six months, people could still get it done. They just have to be more efficient. Um, and then the only other, uh, caveat there is if you want to buy a piece of land. And you want to develop your own property, your own building that is a process that takes more like 18 to 24 months. And again, people have this mindset.
[00:21:30] Colin Carr: I'm like, going to walk into a master plan residential community where there's like, 4 model homes and pick 1, and they're going to have it finished in 6 months. It's because those homes are already pre approved by the building department. They already have a footprint. They already have the plats and all the stuff done.
[00:21:46] Colin Carr: All the utilities are in place. That's not how commercial works. Commercial takes a solid. You know, a solid 18 to 24 months to build your own building. So if you think you might want to build your own building, start two years in advance, if you want to lease a space, whether it's your current space.
[00:22:01] Colin Carr: Whether it's relocate, whether it's to buy an existing building or condo, that's 12 months. And so it depends on what transaction you want to, you want to move forward with.
[00:22:10] Whitney Owens: This is helpful. So, maybe you'll laugh on this 1. I signed a lease 10 years ago and it's month to month,
[00:22:18] Colin Carr: you know, some landlords will do that.
[00:22:21] Colin Carr: And I think it really depends on the community that you're in. It depends on the, you know, the type of practice. You know, some landlords will let you stay month to month and they'll be integrous enough to say if they want you out, they'll give you time. There's other landlords, especially large institutional landlords that you go on a month to month lease.
[00:22:39] Colin Carr: And if they think that you would be in a really bad place if they kicked you out in 30 days they will force you to sign a Lease that's very challenging to you. So a month to month lease can give you Flexibility it can also put you in a very compromised position and just again It just depends on the motivation of the landlord and a lot of times people don't realize What they're actually in for until they get that notice or the landlord sends over a document.
[00:23:07] Colin Carr: And so it happens like no one thinks you're going to get in a car accident until they do. Like no one thinks it's going to flood until it does. Like, like no one thinks the landlord's going to hammer them until it happens. And then they say, I should have done this differently. So to me, a month to month lease is pretty dangerous.
[00:23:23] Whitney Owens: I know. And it's been that way for 10 years. So I'm like, it's working, you know, yeah, I've gone to him and offered to buy the building. I'm like, why don't you just go ahead and sell it to me? Like it's been going this long. He's like, no, I like living off your rent and I'm like, okay, I have three rent, three rents with this guy.
[00:23:39] Whitney Owens: So, you know,
[00:23:40] Colin Carr: yeah. Part of the two is like, what is your ability to move somewhere or to get in a temporary space? Like if you're a dentist and you've got six operatories and you've got a surgery suite, you're If you get kicked out, like sure, there's other dentists nearby, but they might not want you in their space.
[00:23:57] Colin Carr: They might not have room for you. And that can be really challenging. You get into HIPAA concepts and insurance stuff. And the address ties into like Medicare, Medicaid insurance billing. And so you can get into a really tough place. It depends on the type of practice. If you could go post up in traditional office space for a few months, or if you have colleagues that have additional space, that's a different story.
[00:24:18] Colin Carr: And so you just have to realize what, what's the mobility of your practice on short notice. And that, that ultimately determines if you can stand to be in a month, a month. From my perspective, having literally worked on a couple of thousand transactions, I have seen healthcare providers get held hostage, like not once or twice or a dozen times, but literally hundreds of times.
[00:24:38] Colin Carr: And so I'm pretty sensitive to it.
[00:24:42] Whitney Owens: I'm sure I'm sure you hear the worst of the worst.
[00:24:44] Colin Carr: Well, that's the calls we get the calls. We get our I just got noticed. I have to vacate the buildings getting torn down They already signed a lease with someone else They said they'll let me stay but i've got to pay double their rent and i'm already over market So you get those calls and it's you know, we have We have to clean the mess up.
[00:25:02] Colin Carr: So
[00:25:03] Whitney Owens: yeah, people wait to the last minute to get help. And if they had gotten help earlier, they would have prevented a lot of problems. I mean, we see it in therapy all the time. Couples, when they come in for marriage counseling, they should have come in months ago. And by that point, it's hard to clean it up.
[00:25:15] Whitney Owens: Yeah,
[00:25:16] Colin Carr: it's a great analogy. It's, it's really challenging. So there's a lot of things in healthcare where people are like, it's like, why didn't you come in earlier? Like, I have to remove your tooth and put an implant in. I could have done a filling if you would have just came in, like when you first experienced pain two years ago.
[00:25:30] Colin Carr: And it's like. You're I can't fix your tooth now, your whole roots destroyed. And like, we're going to have to do an extraction with an oral surgeon. We're gonna have to do a bone graph. Now we're going to let it sit there without a tooth for the next six months. And then we're going to put a couple of thousand hour implants.
[00:25:43] Colin Carr: So a 200 filling that your insurance would have covered is now going to turn into a 5, 000 problem.
[00:25:49] Whitney Owens: And a
[00:25:50] Colin Carr: lot of things in life that people don't, they just don't deal with it because they're busy or they don't know how to deal with it.
[00:25:56] Whitney Owens: Yeah. Yeah. All right. So you had some other mistakes there. What are some of the other ones?
[00:26:00] Colin Carr: All right. So we're, we're wrapping up now. Um, the, the number one mistake that I would say has the most consequence to it is people do not create a strategy or posture to When they're negotiating and you know, there's a lot of ways that I could hit this one. I'll do the best I can to hit it as briefly as possible, but there's not an MSRP when it comes to real estate.
[00:26:24] Colin Carr: All right. Um, like, like for instance, if you wanted to go buy a Ford F one 50 pickup truck with a certain amount of features, like 10 different Ford dealers and the price is going to be relatively somewhere. Maybe someone's marking it up a couple of thousand more. But Ford themselves says this is what the product should be sold for.
[00:26:42] Colin Carr: And you, you know, Hey, this is, this is a fair price or not. In commercial real estate, you're going to have five people in a building and the difference of what one's paying versus the other ones could be a couple of dollars a square foot. It could be 8 a foot, 10. I mean, the spread can get enormous. And so People they'll just pick one property and they'll start negotiating there and they have no strategy.
[00:27:05] Colin Carr: They have no posture and they have no way to compare the terms of that that that that response. So let me back up and say, here's the problem. The problem is not creating posture, not creating strategy, and they don't have. They're not looking at multiple properties. Like that's that's the issue that they have.
[00:27:22] Colin Carr: They pick one property. They start negotiating. And the reason they do that is because that's how residential works. Like, you go to you go to the market. Either you work with an agent or you're looking online at Zillow or Redfin, Trulia, realtor. com, and you find it and then you have someone submit an offer and if the seller says, yes, you're under contract in commercial real estate, you're supposed to go to market and look at your top options.
[00:27:48] Colin Carr: You're supposed to pick the top three or four properties and you're supposed to negotiate in a non binding basis. Through a letter of intent or request for proposal, and it's very common to go two or three or four rounds of negotiations back and forth with multiple landlords because landlords don't break out their best offer on the first offer.
[00:28:09] Colin Carr: Landlords will tell you I can't do any better. Like, but that's not true. They'll say, well, we've never done this before, but they're just saying that to see if you'll believe them. And so you, you can't figure out what's a really good or a great deal until you've seen multiple landlords that are negotiating.
[00:28:26] Colin Carr: If I submit an offer to 4 different landlords, and 1 of them comes back with 3 months free rent, 1 comes back with 4, 1 comes back with 5, and then 1 says no free rent. Well, we know we've got an outlier here. Well, the other three landlords are doing at least three or four or five months, you need to at least be at three months to be competitive.
[00:28:43] Colin Carr: And so you can, you can pit one landlord against the other landlords. Now that one another might choose not to do anything differently, but that's how you get landlords to get competitive. If they know they're competing, it's a whole different story. And so that is the strategy of top companies. If Starbucks or Chipotle.
[00:29:00] Colin Carr: Charles Schwab or Lockheed Martin, like pick an office or a retailer or an industrial user. They don't pick one property. They go to market. They look at all their options and they will, they will see what they're able to accomplish depending on the property, the quality of the property, the motivation, the landlord, and they don't move forward with one property until they know how it compares to the market.
[00:29:22] Colin Carr: And that is the ultimate strategy of commercial real estate. And that's what most healthcare providers, they don't have the time to do it. They don't know how to do it. And so they just take what I said not to do, which is they just drive around, call on a property, find a property, ask for an offer, ask the landlord, if you would do this, this, and this, they give a little bit of concessions, feel like they want a little bit.
[00:29:43] Colin Carr: Meanwhile, the landlord is laughing to the bank because they just, by 200 grand. So sure, th
[00:29:53] Colin Carr: You know, maybe came down on the lease rate. The client thinks that, you know, they did a great job negotiating. They're pretty savvy. They tell their spouse, man, I really improved the offer. They're feeling good. And meanwhile, the landlord's thinking themselves, like what an idiot, like this, this person thinks they got a good deal and said, this is my, this is my new highest rent in the property, or this is my new lowest amount of concessions on any deal that I've done.
[00:30:18] Whitney Owens: Mm. Yeah. Goodness. Yeah. So what else do you have there?
[00:30:25] Colin Carr: Um, you know, the another one that comes up often is health care providers love to talk to each other, which is a very good thing in a lot of ways. Um, but that's not the greatest benchmark. So they'll say, well, hey, what are you paying in the property right now?
[00:30:40] Colin Carr: Or what did you get? And so I'll get a quick example. We had a medical building in Centennial and we were, we were getting ready to negotiate a lease for a doctor and, you know, he was paying a certain lease rate and we just said, Hey, do you feel like you have a good lease for it or a bad lease for it? He goes, no, this is fair.
[00:30:58] Colin Carr: And we said, well, what are you basing that on? And he goes, well, everyone on my floor is paying the same lease rate. And I said, well, the last time you did your lease renewal, you did it yourself, correct? Yes, I did. I'm like, well, how much free rent did you give and how much T. I. did you get, etc.? And he's like, well, the landlord doesn't do those things.
[00:31:13] Colin Carr: Like, no one on my floor has ever gotten those things. I'm good friends with four other practices. And I said, well, here's the deal. We just did a deal on the first floor at like 8 a foot less than you're paying right now. And we got that doctor eight months of free rent versus zero. And we got them a 40 per square foot tenant payment allowance to fully renovate the space versus zero.
[00:31:33] Colin Carr: And we got them some other concessions. So what you're saying to me is you and your four friends. Are all like consulting each other with really bad information and you guys think that this is the standard like you think the ceiling is your ceiling is actually the floor like you guys are upside down like it's what you think is a fair deal is a terrible deal and yet you guys keep convincing each other and coaching each other that you're in good shape like you're all losing the race you you guys are running the wrong direction you think you're in first place.
[00:32:06] Colin Carr: You know, getting information, people can be great if it's good information. Um, but again, take it to like a therapy analogy. Like somebody gives you advice and you're like, who told you that? And you're like, that's the worst advice I've ever heard. Like, oh, I thought this was good advice. So,
[00:32:20] Whitney Owens: oh yeah. Well, I see this in the business coaching.
[00:32:22] Whitney Owens: I do all the time. Someone will be like, oh, this is what my friend said to do. Or this is the paperwork my friend said to use. And I'm like, did you get that reviewed? And like, did you talk to a business consultant about that? Like, no, you know, um, gosh, that was such an engaging story. And so awful poor guy.
[00:32:36] Colin Carr: Yeah. So I mean, I keep going. I mean, the summary is this, just like you wouldn't do your taxes. Like you said, if somebody sued you, you wouldn't like show up to court without an attorney. There's a lot of things you shouldn't be doing. Like your, your child needs braces. Like you don't pull your child's tooth for them.
[00:32:51] Colin Carr: Like you go to the oral surgeon, like you just, there's things you do that are pretty obvious just because you can do a real estate deal by yourself. Um, doesn't mean it's going to be done. Right. You know, and again, getting a deal done is not the same as getting a good deal or protecting yourself. So. Hire a broker or an agent synonymous terms, depending on the state you're in, a licensee, et cetera, hire a representation for your practice.
[00:33:14] Colin Carr: Let them go to market. Let them look at options to lease or purchase. Let them look at, you know, look at different types of building sizes, qualities, and then, and then help choose the top three or four properties that you could see yourself practicing in that, that, you know, even if one or two is your favorite, still look at three or four properties and then let them go three or four rounds of negotiation.
[00:33:35] Colin Carr: And the beauty of that process is not just the economics, um, and, and, and so forth, it's the fact that you're going to have peace of mind, like you're not going to wonder, did I get a good deal? Is this a good deal? Is this a bad deal? Should I look at other properties? Do I have a good landlord? How are they responding?
[00:33:50] Colin Carr: How are they treating me in the, in the, in the negotiations? Am I already being disrespected by them at a high level? Like those are things that are really good to figure out ahead of time. And if you're looking at a purchase, how does the purchase compare to the lease? Like, if you have an option to purchase, and you have the down payment, and you can afford the monthly cash flow, um, how does that compare to leasing?
[00:34:09] Colin Carr: Like, what's the principal pay down? What are the tax deductions? What's the depreciation? And you take that information, and you're just simply just comparing it, um, one property to the other, and it becomes really clear, like, this is the best option for you. It's the best property, here's the best terms. Or you might say, look, This one's more expensive, but it's worth it to me.
[00:34:27] Colin Carr: Like I like this one. It's, I don't need the cheapest. I want, I want the right property. And for my practice, this is the best one. And then when you sign a five year or seven year or 10 year lease, Or you close on the real estate, you don't have buyer's remorse. You don't say, shoot, I should have gone and looked at other properties, now I've walked into a seven year lease, I'm stuck.
[00:34:47] Colin Carr: You don't want to be in that situation. You want to do your due diligence, and you want to do it right the first time. So, measure twice, cut once, that adage, it's a great way to do business, especially for commercial real estate.
[00:34:58] Whitney Owens: Yeah. Okay. I got like two really big questions that I get a lot from practice owners.
[00:35:03] Whitney Owens: One is how much money should I spend on my lease or my mortgage? Like, do you have like a percentage of revenue that you should be spending on that?
[00:35:14] Colin Carr: You know, there's some numbers that I hear, um, thrown out across a number of industries and it typically isn't like the six to 8 percent of, of revenue. And that, that, You know, that's a tough question because the first one is that you have to ask before you ask that is, well, how established is your practice?
[00:35:32] Colin Carr: If it's a new practice, your numbers aren't going to be there. Like if you're stabilized, like you've been in practice for a number of years and you're operating at a pretty good capacity, you know, four days a week or three and a half or whatever you want to run, maybe it's five, you know, that's a different story.
[00:35:46] Colin Carr: So once you're stabilized from a revenue standpoint, You know, can you get the rents under 10 percent? Um, you know, six to eight seems to be the target that I hear all the time. You know, I think it just depends because you could have six percent of a half million dollars or you could have 10 percent of a million and a half dollars.
[00:36:04] Colin Carr: And so it just depends on like, again, what size practice, sole practitioner, multi provider. Um, there's a lot of things that are there. So to me, it's, it's more just the overall idea. Is this a manageable number for you? And is it worth it? The better question is, in my opinion, what are your options? Like, as opposed to saying like, how much should I pay?
[00:36:24] Colin Carr: It's like, all right, if you need a thousand square feet or 2000 feet or 3000 feet or whatever you need, and you want to be in this city or this market, we can talk about what the ratio should be. But the bigger question is what are your options right now? Because we can't make a property come out of thin air and we can't force a landlord charge a rent they don't want to.
[00:36:44] Colin Carr: So really it's a question of. Of the of the market you want to be in the property type. You want to be located in what are what are the options for you to lease or own? And that really to me is the is the more defining question. And again, people will share. Well, I'm only paying 5 percent or I'm paying 15.
[00:37:02] Colin Carr: the tough 1. the other thing to it that makes it tough is if you're if you're owning the property and you're paying a mortgage. Well, every check you cut a portion of that pays down principal. So every month your net worth increases. And so just like a house, I I'm willing to pay more to own my house than I am to rent, because, you know, I get to write off the interest up to a certain amount of money.
[00:37:22] Colin Carr: I get to write off the property taxes. Um, my, I have the upside of the property appreciating every year, which we've seen a huge appreciation the last 10 years. Um, I get to, you know, I get to, I get to do different things. My, my, my net worth goes up every month. And so. You know, if you're owning you, you should be willing to pay a pretty good amount more than you would leasing because there's a lot more benefits there for you.
[00:37:45] Colin Carr: Um, so tough question. I would say the answer, I'll give you the attorney's answer. It depends, um, on the variables.
[00:37:52] Whitney Owens: Oh, this was a, that was a great explanation. And yeah, this building I just purchased is mine. So I'm like excited. I'm paying myself. Right. I'm paying my, I'm paying my business. So I'm like, yes, making money instead of giving it to someone else.
[00:38:07] Whitney Owens: And that's huge. All right. Here's the, here's the other thing I get. And then when people are looking at space, they're thinking, well, I'm going to grow. And so how do you decide space thinking, okay, well, maybe 3 years from now, or 5 years from now, I'm going to be this size, but I always tell therapists, like, don't plan for something that hasn't happened.
[00:38:28] Whitney Owens: And I think what you're talking about business, how long you've had your business, that probably really influences it. But I think a lot of people. Out by space, like they buy too much space for what they actually need, especially when they only have like two therapists in their practice. And they think, well, I'm going to be at seven by next year.
[00:38:44] Whitney Owens: And I'm like, you don't know that.
[00:38:47] Colin Carr: Yeah. So this is one of the toughest questions because there there's tension on the line where I use the rubber band analogy. If it's too loose, if it's too loose, it doesn't work the way it's supposed to. If it's too tight, you can break it or get snapped. So you've got to find, A square footage that allows you to grow, but doesn't, but doesn't completely tie you down in a negative way for the next couple of years.
[00:39:09] Colin Carr: So, so a lot of times the question is, where do you see yourself in six months, a year, two years, three years. We don't, I mean, we can plan for seven years from now, but you don't want to be paying on an extra thousand, 2000 square feet for six years where you're not using that. So there's always this, again, there's always this tension of what do you need currently?
[00:39:27] Colin Carr: And typically that's not what we're going for because you, you do have a, an objective of growing or doing more. So where do you see yourself in a year, 2 years reasonably or conservatively? What's what's maybe the smallest and what's the highest opportunity to grow? And we try to find some balance there.
[00:39:44] Colin Carr: Sometimes it's determined by what what's available. You might say, hey, I need 3000 feet, but only 2500 available in the property you want to be in. That might determine that for you. Um, other times there's options of like, hey, we can get our first right of refusal on an adjacent space, or we get an option to expand.
[00:40:00] Colin Carr: That's great. Um, but yeah, I mean, this is a, this is a top question. The only person who can truly answer it is the provider or the person signing the lease. The broker can show you your options, but, uh, it's what do you need currently? What do you see yourself needing in a year or two years or three years?
[00:40:16] Colin Carr: Um, and then, you know, best case scenario is you outgrow the space and you're busting at the seams. Worst case scenario is you're paying on all sorts of additional space that you're not able to use. And it's just a, it's just a liability every month. No one wants to be in that situation. So it's definitely a balancing act.
[00:40:32] Whitney Owens: Yeah, and that's why I like having that percentage number when people are like, well, I'm going to get all these offices. I'm like, well, is it 8 percent or less of what you're bringing in in revenue? Because if it is, then go ahead and get the space if you think you're going to make it. But if it's a lot more than that, then that's not a good idea.
[00:40:47] Colin Carr: Yeah, the tough part about revenue though, too, and this is one that comes a lot of time is you've got cash only fee for service practices. And then you've got ones that are supplemented by insurance and the ones that are entirely insurance based. And so the profit margins of those types of practices can be really different.
[00:41:05] Colin Carr: You also go to the concepts. Like, do you have any debt? Like, did you buy a franchise or did you buy someone's practice? Are you carrying a note? And so you can get people that again, you can have someone who's. Who does just use round numbers, half a million dollars in revenue with no debt. That's cash only.
[00:41:20] Colin Carr: That's got low overhead. Who makes more than someone who's doing a million dollars a year that has a loan that has high overhead. That's that's heavily insurance based. That's significant reimbursements. And you can find yourself. This is true whether it's dental or medical or veterinary or therapy. You can find a a revenue is great.
[00:41:38] Colin Carr: But what is your net profit or your EBITDA? That's I care more about that personally. And a lot of times when you're seeing, you know, practices sell, um, they'll, they'll use a multiplier off of revenue cause it's a little bit cleaner or easier, but they're always looking at that net profit. And that's really the multiplier that they're going after.
[00:41:55] Whitney Owens: Yeah. Well, this has been so helpful. And great. I think you're providing a lot of value for us and I'll be using the stuff you said when I'm doing my business consulting because this has been really helpful. Um, so can you tell us next steps? Therapists are listening and they're thinking I need some help.
[00:42:10] Whitney Owens: I need help. What do they do?
[00:42:12] Colin Carr: Yeah, so, um, we would be happy to have a conversation with anyone with their healthcare real estate. Best way to get ahold of us is our website and that's car. us. So it's C A R R dot U S. Um, and the nav bar, you can click to find an agent and just start a conversation. And the best way to do that is just to say, Hey, you know, here's what I'm thinking about doing, here's what I'd like to do, or I have a lease coming up.
[00:42:33] Colin Carr: And just let someone just tell you what their thoughts are about the current market, the city or area you're in. If you have a current lease, they can take it, they can do a lease analysis for you and say, Hey, based upon what I'm seeing in the market, I think you've got a good lease. You have a bad lease.
[00:42:47] Colin Carr: You're really out of line with the market. Um, here's the right time to start your next transaction. And they just give you information that, that helps prepare you for what's next or what you should be paying attention to. Um, there's no silver bullet that every deal takes an evaluation. Every deal takes, uh, You know a market comp study.
[00:43:06] Colin Carr: Um, and then a lot of times too. It's just supply and demand Like there's sometimes when someone shows up and says I want to own And and we go to market it's like well There's two properties for sale one's 8 million and one's 14 million And they're like well, I was hoping for under a million like just doesn't exist, you know And so other times you go to market and there's you might you might have 10 properties to buy So the supply and demand affects it the market affects it.
[00:43:27] Colin Carr: Um, you know, so the best game plan is hire a broker Go to market look at your options You Don't fall in love with one property. Let somebody truly consult with you and help you understand and evaluate. And then you'll become a market expert very quickly, believe it or not. And you won't have to wonder what you should do.
[00:43:45] Colin Carr: You'll know what makes the most sense for your practice.
[00:43:47] Whitney Owens: Yeah, definitely. Well, Colin, thank you so much for taking the time to be on the show. Lots of value. Looking forward to sharing this episode with the audience.
[00:43:56] Colin Carr: I appreciate you having me. Thank you.
[00:44:17] Whitney Owens: Special thanks to Marty Altman for the music in this podcast. The Wise Practice Podcast is part of the Sitecraft Podcast Network, a collaboration of independent podcasters focused on helping people live more meaningful and productive lives. To learn more about the other amazing podcasts in the network, head on over to sitecraftnetwork.
[00:44:37] Whitney Owens: com. The Wise Practice Podcast represents the opinions of Whitney Owens and her guests. This podcast is for educational purposes only, and the content should not be taken as legal advice. If you have legal questions, please consult an attorney.
