https://www.youtube.com/watch?v=ciqW_I2pzfY

Every private practice owner should own the building they're in. Today we're talking to Colin Carr. He is an expert in real estate, founder and CEO of Carr Incorporated, the nation's leading provider of healthcare real estate for services for only tenants and buyers. There's so so niche, the only help healthcare professionals or private practice owners buy or lease their buildings. And we're going to be talking about how to avoid the biggest mistakes that private practice owners make when it comes to leasing and buying. We're going to talk about why buying is so important, no matter what the market is, when the best time is to join the real estate game, where you are in your stage of business, and how that could influence whether you buy or lease. We're going to talk about saving hundreds of thousands of dollars with I've had very small negotiating tactics. This episode is worth so much money and it's super short. I think it's like 40 minutes. Yeah, Colin, I am on a mission like you are to help private practice owners understand the importance of, of owning the real estate that their business is in. I didn't know until after I sold, like how valuable that was. So let's start really like fundamental stuff. Let you know, when a private practice owner is looking at their real estate consideration. What do you think the pros and cons are of leasing versus owning the space?

Yeah, there's a lot of factors that go into whether you lease or purchase. But before I jump in there, I do want to hit on what you just said. If you have the ability to own real estate, the real estate is going to be worth more than a practice once you get ready to sell. Literally, it's 80 or 90% of the time the real estate is worth more than the practice. And so when you look at the value of that, you might spend 10, 15, 20, 30 years building a practice and you can purchase real estate if you have the ability to and it fits your requirement. That's going to be worth more than the practice at some point. So it's really a two for one. I mean, it's two of your largest assets that you have and they're both very saleable and the real estate becomes even worth more money when you have a practice tied to it. So I couldn't agree more. Only real estate is one of the greatest investments that healthcare providers will ever make. the question on what you should do as far as far as leasing or purchasing, it comes down to a couple factors. Number one, it comes down to inventory. You might have a desire to own real estate. Like you might have an established practice and say, like, I'm leasing, I want to purchase now, and you might go to the market and there might not be any properties for sale that meets your criteria. It's not like residential where there's always another house for sale or you can just push into another neighborhood or go a little further away from the metro area. Commercial real estate, if you're in a finite area and you want to stay in a certain market, there might not be any options for you to buy. And it depends on the market. If you're in Tulsa, Oklahoma, there's going to be land on the outskirts. If you're in Manhattan, there's no more land. And so, inventory is going to determine real quickly whether you've got options to purchase or not. The next factor is going to be just what's your current situation? Do you have money for the down payment? What's the cash flow look like? you know, what's the quality of property? Sometimes you can buy real estate, but if it's in an inferior location, it's going to hurt your patient referrals. If it's maybe not as good of a location as you could find a lease, you got to take that into consideration too. So, and then you just get into the economics of it. You start looking at concepts like what's it cost to lease versus what's it cost to have a mortgage? What does it look like after you factor in tax deductions? Like when you own commercial real estate, you can depreciate that real estate and you can pick up additional tax deductions. What does it look like after principal pay down? You know, when you cut a check to a landlord, that money goes to the landlord. When you cut a check to a lender, like a mortgage company, a portion of that pays down principal and every month your net worth goes up. So you can take a portion of that principal away from the payment, say this is really just the forced savings account. And so the numbers are going to tell a different story. You might start out and have a lease that's 5,000 a month. a purchase that's $10,000 a month, but after depreciation, after some of the deductions, after principal paydown, the effective cost of owning might actually be less than leasing. So you've just got to run the numbers and say, what's the actual cost of owning versus leasing? And then you factor in some of those other items like inventory and quality.

Of properties and so forth. Yeah, but it sounds like as great as that was, and thank you for defining that, it sounds like at the.

End of the day, whenever possible, owning is the way to go. that's my preference personally. I mean, there's some exceptions that rule. If you just said, listen, I'm going to be selling my practice in a year or two, I've got, you know, a lease renewal coming up. I just want to just kind of stamp a lease renewal, then, you know, sell my practice in a year or two and drift off into the sunset. Like, that's a different story. If you're just getting started and you think you're going to want a much larger space or a different type of building in the future, you know, leasing might be the best option for you to get started. Maybe you lease for five years, then once you get your feet underneath you and you know the exact area you want to be in, you know the exact size that's going to facilitate your needs for the next 10-15 years, then you buy the right size building. So there are times leasing does make more sense. But if you are in a position where you can see yourself in that building for 15-20 years, you've got the ability to put the down payment on it. The financing is going to work for you. You know, I'm going to push towards the purchase 9 out of 10 times.

Well, and that's what I want to confirm. That was the biggest surprise of my, on the financial end of my exit. So I had four to five locations and when I exited, I had ownership in two of the buildings. And it was so amazing to me how that played out. Because as one of my friends, Ed Drummond says, who's a real estate expert, he's like, it's not timing the market of real estate, it's time in the market. And so what you're saying is paralleled with that, you know? Private practice owners who have their own business, if they own their own building, while they're doing this thing called owning the business, there's all these short-term advantages tax-wise for owning the building. Not to mention before I continue, my call and there were times where we would have a financially slow month. And so we just reduced our rent that month because there was a little bit of a gap there. So we were able to make some adjustments that helped the business in a way that a landlord wouldn't been able to do. Yeah, and then when we sold, it was so crazy because you said it best. Sometimes the value of the building is worth as or more than the value of the business. And like in my case, the buyers wanted to sign the highest level leases they could to keep me engaged in the business. So I got a AAA lease with all these wonderful, like it was a great lease. And after selling the practice, having that business, the building, sorry, the income from the building come in has been huge. And my net worth, has continued to scale over time because that building continues to become more and more valuable. Anything you want to say on that piece before I start drilling you? Yeah, no, to that point, I mean.

When you own the real estate and you go to sell the practice, you can decide at that point, you want to sell both assets, you want to sell the real estate and the practice and cash out of both. A lot of people though will sell the practice and then they'll write like a 10, 12 or 15 year lease with the buyer of the practice and then they'll continue to either pay that building off or if it is paid off, they'll just continue to cash flow and it just becomes an annuity. And so you continue to pick up tax deductions as an owner. Every year you get depreciation, every year you get interest write-offs and other operating expense write-offs. Every month the principal pay down goes to build your net worth if you still have a loan on it. So a lot of people will choose to sell the practice, hold the real estate, and at that point you could hold it for five years, then sell it. You can hold it for 10, 15, you can hold as long as you want to, but it becomes another like a secondary business, if you will. and as long as you're the owner of the practice, you are the most surefire tenant you're going to ever have. If you're going to bet on anyone, you bet on yourself. And then even when you go to sell the practice, you've got someone who's qualified enough to purchase the practice. You set it up, you know if it's a good location, you know if it's run properly, you know the property has been taken care of well because you've been the owner, and it becomes one of your best commercial real estate.

Investments you can get your hands on. Yeah, Rockstars, what Colin is saying is so valuable in so many ways because I saw a guy in my exit who had multiple locations. He used the money that he got for his practice to pay off the remaining portion balances on his commercial real estate loans, which is, by the way, there's controversy in that, but he did it because he wanted the passive income. So it's like, like he, Colin said, it's like starting, it's like having this whole other business that doesn't require effort. Like that was the thing. It's like it continues to grow value without you doing, I mean there's some property ownership steps, but they're so small. And you can hire companies that are out there. There's great ones I can recommend. But ultimately there's this idea of like you're putting very little effort into this growing net worth and then the passive income. This guy was receiving multiple six figures every month because he had sold his business and then set up these crazy cool leases and just the freedom it creates. I always tell people, if you're going to start a business, buy the building. So, Colin, my question to you is, you're obviously recommending that even still with the interest rates being where they are now versus where they were. Let's talk about real-time investments for people who are like, yeah, but aren't interest rates rising? What do you say to those people who are in a position where it would probably make sense for them to own a building, but they're concerned about the market?

Yeah, that's great. So here's what I tell you. Interest rates right now are very fair. If you were to compare them where they were four or five years ago, that's the lowest they've ever been in the history of interest rates. And so it's not a real good if you look at a historical chart of the last 20-30 years, the markets go up, markets go down, rates go up, rates go down. You can't anchor to where they were three or four years ago because that was an anomaly. Where they're at today, I mean, if you're purchasing commercial real estate, to get an interest rate at maybe five and a half, six, six and a half percent, even seven, that's still a very fair interest rate. And the bottom line is we know a couple of things. We know the market's going to keep moving. We know rates are going to go up and down. if rates are higher than you want, you still transact, you still buy the right building at the right time, and then you just simply refinance it. I mean, if rates come down in six months or a year, then you refinance it. And it's not hard to figure out. So, you know, Savvy real estate investors don't sit on the sidelines indefinitely just because rates are not where they want. They still buy good properties, and then they just wait for the market to adjust. And then when rates go down, they, they capitalize, they refinance properties, then all of a sudden things make more sense and they're even more profitable. So I mean, we're not seeing any slowdown. Now, again, if rates were 12%, yeah, you would see less people being able to afford the same amount of real estate. You'd have to either, you know, downsize the size of the building or the purchase price to make the numbers work. But, I mean, you're talking about interest rates, like in again, the high fives, sixes, you know, maybe a high six or a seven, depending on if it was an SBA loan or something was unusual about it. I mean, a 6% interest rate, that's as normal as it gets. I mean, that's, yeah, that's still a very good interest rate. You can't compare it to when rates were at 3% because that was the product of a lot of crazy things happening. That's just not where we're at today.

Yeah. It's so funny that you mentioned that. I think the key thing you said earlier, Colin, was this idea that this is for people who are going to be in their business for a while. If you have 10 years minimum. Here's a story to illustrate your point. My first commercial building that I purchased for my physical therapy practice was in 2006. I bought at the peak of peaks before the crash of crashes. We bought our building. It was a half million dollar building for 2000 square feet back in 2006. Literally in a year and a half, it was worth half that much. People were selling around for under $250,000. I was aware of this. I wasn't thrilled about it, but it didn't bum me out because I knew this was a practice that I was going to be growing for decades. at least a decade. And a decade's a long time, you know? So like for me, what we still even then enjoyed having the control of the mortgage, I think the key thing there was that we could afford the initial payment. That was big because as things fluctuated in that practice and it fluctuated, that was a secondary location for us. So we were learning how to be real business owners at the time. So like the profits would rise and fall and there was times where we cut rent down. but we were always able to pay our loan. That was the big thing. But then, you know, it fast forward to 2018 and we actually ended up selling that business just a couple of years ago or the building. We sold the business in 2018, but then we kept the mortgage or the, excuse me, the renter income on that. And then we decided to leverage that into buying more real estate. So me and my partner sold that building and we ended up selling it for a profit that was more than what our initial loan was.

So it's just kind of like a.

Really cool illustration of what you said is like, when people are listening, they're like, I worry about timing the market. It's not timing the market. It's time in the market. The bigger question I want healthcare providers to ask is where is healthcare going in the next 10, 20 years? If they're going to be in their business for 10 to 20 years, where is healthcare going? Nowhere. So as long as they're going to stay in it and grind through the normal crap with insurance or whatever they're doing, assistant< end_header_id >assistant< end_header_id >assistant< end_header_id > you know, there's going to be a, you know, return on that. So what I love about you guys, and I mentioned this in the introduction, is that you guys specialize, like you are the most niche and you're the biggest in the country that specialize in helping doctors and healthcare company owners find the right real estate options for them. So.

How does you being specialized provide, you know, additional value for people that you work with? Yeah, I appreciate the question. So, you know, it's very similar to healthcare. I mean, if you want to, you know, get braces, you're not going to go to an oral surgery, you go to an orthodontist. If you're gonna get your hip replaced, you're gonna go to an orthopedic surgeon. Everyone's got, you know, their own lane in some form of healthcare. It's the same thing for physical therapy. Like, you're going to a physical therapist because they're trained in a way that helps you get back to your prime or to help you get beyond anywhere you've ever been before recovery from a surgery, an injury, whatever it might be. You're not going to a family practice doctor for that. You're going to a physical therapist. It's the same thing for us. Like all we do is specialize and representing healthcare providers. We're only on the tenant buyer side. We don't do any landlord or any seller work. And so the first thing that comes up is we just don't have conflicts of interest. Like.

That'S the number one thing that you.

Have to be aware of. That's a big one. Because people will drive around and call on a building or they'll get online and search a database and they'll call the listing agent. The listing agent will start facilitating information. We'll have to show you the property. and all of a sudden that person doesn't realize the person you're talking to has a legal obligation, a fiduciary obligation to help the seller or the landlord maximize their profitability, meaning they're going to take you for the highest lease rate, the highest purchase price, the lowest concessions. They had a legal obligation basically to punish you in the negotiation. And so again, the person is not going to be an idiot. They're not going to tell you that and they're not going to they're going to be gracious, cordial, accommodating, they're going to follow up with you and you're, oh, this man, you're going to say, this guy is really nice or this lady is really nice. They're legally working against you. Like, and so once you realize that you can't be in a situation where there's conflicts of interest, that's paramount. And then you get to the place where you realize that you've got to have specialized representation. You got to have an advocate on your side of the table who knows what they're doing, who understands how to maximize your upside. How do you get the most competitive lease rate or purchase price? How do you get the highest level of concessions? How do you avoid getting stuck in pitfalls, delays or traps that people fall into all the time when they don't know what they're doing? And you realize how much money is really on the line. That's the foundation of our business. Yeah.

And it's so true. I had a situation like that where I had a real estate agent who was working both sides of the thing and they weren't even healthcare specific. And that lease was so disappointing compared to these other leases I had. and I really value that part of being hyper specialized, you niche, and that's where the value comes in. So let's talk about mistakes then. What are the most common mistakes that private practice owners make when they're purchasing their real estate? Yeah.

Absolutely. So I'll give you three or four and these are going to apply to whether you purchase or lease. It's kind of the same thing. The very first one is do it yourself. It's the doctor or the administrator that says I don't know. I'm a smart, intelligent person. I know how to pick up a phone. I know how to send an email. I can negotiate. I can sign a lease. you can do every one of those things, but you can't do them as well as someone who specializes. So the number one mistake we see people making is they just do it themselves. And, yeah, I mean, I can pull my own teeth. Like, I have a pair of pliers, and, like, I can, you know, I can have my son, like, jump on my back and adjust my back. Like, I can do a lot of things myself, but I'm not going to get the same result. So the do-it-yourself is, is number one unequivocally number two. Before.

You jump in, there's legal things, too. Like, there's, there's those things called you do it better, but there's a whole bunch of legal stuff that's just out there constantly floating around and to not have to like, to either just do it thinking, I'll never affect me is silly or to be overly worried when you don't even know how, where to start learning that stuff. It's nice to have the legalities of how these things work, just kind of handle because you're working with professionals. Yeah.

There'S the legalities, absolutely. But there's also just like street credibility. Like there's no landlord on the face of the earth that's going to get a phone call from a healthcare provider and think, oh, this guy is a real estate savvy expert. Like there's no way, like, When a real estate listing broker or a real estate landlord gets a call from a doctor, they're they're licking their chops. They're instantly thinking like, I'm going to take him or her for a 20% premium. I'm going to I'm going to save myself probably 50 to $100,000 in concessions. Like there's no respect there. It's not hard to figure out like some random person that has no idea about real estate at Chipotle is not calling on properties like Starbucks doesn't have some random like administrative assistant just dialing to say what's available. take any Fortune 500 company, the only people that are making the phone calls on real estate are the most qualified experts in the country. And so, like, you look at what does a Fortune 500 or 100 company do? And then a healthcare provider will do the exact opposite of that and think that they're like, they're super Savvy. And so I don't mean that disrespectfully. I just. But the amount of health providers. Yeah, they just. It's like, if you got, if you got a letter saying you're being sued, there's no one in their right mind would say, I'm just going to go it alone. Like you would lawyer up instantly or if you get a letter from the IRS saying like you owe a bunch of taxes or you made a mistake, like there's no way you're just going to pick up the phone and call the IRS. Like you're going to have your CPA or a tax attorney make that first phone call because there's no credibility when some random person who's not trained in an area, you know, is trying to do something. And so I love that. I love that the do it yourself is by far number one. the number the number two mistake, and this is one that's probably going to surprise people because it's very different than most people think is they don't know how to negotiate. They'll pick one property and they'll just start trading paper or submitting offers. And the problem with that is there's no there's no benchmark or plumb line to measure the deal against. And so the reason this is this is contrary to how people think is because in residential real estate, you know, whether you go with an agent or you look online, when you find the property you like, you submit an offer. and it's typical to submit one offer, it's in a contract form. If the seller says, yes, I like it, or they counter you and then you agree, you're in a legally binding contract. There's options for you to get out or to void it based upon objections and deadlines and requirements, but you typically pick one property, submit the offer, and if they say, yes, you're under contract. In commercial real estate, you negotiate on a non-binding basis in a letter of intent or an RFP request for proposal. and it's common in commercial real estate to be negotiating with four or five landlords or sellers simultaneously. And the reason being is you don't have any idea if one landlord is much more motivated than another landlord. You might have two properties that are side by side that look identical. Well, one landlord might have bought it 20 years ago and have no mortgage. The other guy is leveraged to the hilt and he can't do the same deal. One landlord might be getting ready to sell their property and they want the highest lease rate, but they're willing to give significant concessions for it. The other guy is going to hold it for the next 20 years, and he's willing to do a much more competitive deal because he wants occupancy over lease rate. And so you don't know those things until you negotiate multiple people. And also, too, landlords aren't going to give you their best deal. A landlord is not going to come up and say, look, I would do a deal at $25 a square foot if I was pressed. So here's 25. They're going to come at you at 30, they're not coming to 25 unless there's a fear of loss, unless they think they're going to miss the deal, unless they think other landlords that they're competing against are doing the same thing. They're not going to just voluntarily give you a $200,000 rent reduction because you asked them. They have to be pushed into that deal. Other landlords that they're competing against are doing the same thing. They're not going to just voluntarily give you a $200,000 rent reduction because you asked them. They have to be pushed into that deal. or forced to do it to be competitive with the market. Like nobody just voluntarily gives away hundreds of thousands of dollars. And so you don't do things like that unless you have to. Like if you were a provider, you would never lower your rates or fees or accept a lower re or forced to do it to be competitive with the market. Like nobody just voluntarily gives away. Embursement from an insurance company unless you had to. And so yeah, and that that's the whole idea. And so, but you, you, I'll say this and I'll let you jump in. You cannot get to that point unless you have four or five landlords that you can leverage against each other, put one against the other, and then you've got real time intelligence coming at you. This guy's willing to do this. This guy's willing to offer this much free rent. This guy's willing to do this. These three properties are at 2% annual increases. I'm not going to pay three and a half with you. You don't have that information unless you were in the market with multiple landlords and.

Multiple offers going back and forth. Yeah, I love that. It seems like to me, From what you just said, there's a lot of reasons why you'd want to work with a professional who's hyper niche in this space. If you're going to be purchasing a building as a private practice owner, there's all these things that you mentioned, but you really hyper focused on the negotiation part of it. Like there's all these legalities, there's all these different steps. But when you were talking right now, I got a real sense that like negotiating is a different level at these commercial real estate pieces. So how much is really on the line? Like when people are thinking about negotiating, what.

Does that look like? I think you gave a good example for example, but is there anything else you would add to that? Yeah, I mean, there's a couple hundred thousand dollars that are in play in every transaction. And that number catches people off guard. They either are surprised by it or they don't believe it, but it's, it's, yeah.

How do you get to that like number? Like I'm sure use some scenarios that would.

Paint that picture. Yeah. So, so let's say, let's say the space is 3,000 square feet. That'd be a standard commercial real estate space for a lot of different types of practices, whether it's physical therapy or other uses. If you overpay by, let's say, like, let's say $3 a square foot, which that's super easy to overpay by that amount of money. that's only like a 10% difference on lease rate for a lot of properties, like a gross lease rate of 30th square foot or even a base lease rate of 30th square foot. You know, if you overpay by $3 a square foot, you know, $3 a square foot times 3000 square feet, that's $90,000 over 10 years. So that's just the lease rate. If you have an annual increase, let's say that's at three and a half percent and you could have paid 3% or two and a half percent and you're on an inflated lease rate already, like there's tens of thousands of dollars more in annual increases that you could have avoided. if you miss out on a couple months of free rent, like not just free build out period, but actually free rent to start your new deal. I mean, it's not hard to figure out. I mean, every month of free rent, $30 a square foot on 3000 square feet, that's $7,500 a month. If you only got a month or two of free rent, you could have received four or five months of free rent. There's another 25, $30,000. Wow.

And.

So you start getting into things like build out allowances, like to renovate a space. there's a number of other concessions that are available. So again, you just start, you take 90, 000 here, 20, 000 here, 30, 000 there, and, and you add it up, it's very easy to come up with a couple hundred thousand. But even if it was just 50, 000, like, I don't, like, let's take it down to the most, like, lowest number you could imagine. Like, who wants to lose fifty thousand dollars.

If you didn't have to? And it was hundreds of thousands of dollars plus, like, terms. I think another thing that goes in negotiating that I, I experienced was this idea of, like, having a professional negotiate terms because there's the deal and then there's the terms. I coach people on how to sell their practices. I tell people all the time who here would sell their business for $10 million, right? Every hand goes up. It's like, okay. And then I start going through terms with all these clawbacks and provisions and very quickly there's not a single hand raised. So you have the money that's being left on the table and by the way, that's scary. $3 a square foot more. I could see a private practice owner going, oh, that's not that big of a difference, 10%. But we're talking six figures of difference and this idea of like having a professional negotiate terms because there's the deal and then there's the terms. I coach people on how to sell their practices. I tell people all the time, who here would sell their business for $10 million? Every hand goes up. It's like, okay. And then I start going through terms with all these clawbacks and provisions And very quickly there's not a single, they're the ones because they know you don't have a representative. They're the ones saying like, well, let's see.

If he takes it. Yeah. And they'll, they'll say stuff like this is, they'll say, you know, this is the lowest rate in the center. Like, I've never done this deal before. Like, man, you literally they'll say things like, man, you're a really good negotiator. I mean, it's literally, I joke around, it's like a four year old wrestling their 40 year old dad. Like.

Somehow the four year old manages, manages the pin the 40 year old dad hand raised. So you have like the money that's being left on the table and by the way, that's scary. $3 a square foot more. Like I could see a private practice owner going, oh, that's not that big of a difference. 10%. But we're talking six figures of difference and they're the ones because they know you don't have a representative, they're the ones saying like, well, let's see if he takes it. And.

Then goes and tells mom like, Hey, Dad, or I just beat Dad in a wrestling match and the four-year-old is just like walking high. I mean, landlords will say stuff to these tenants. especially healthcare providers, that they would never say in a million years again to like a Charles Schwab or like a JP Chase Morgan or a Lockheed Martin, like pick your large Amazon, your large national company. They would have, and they'll say stuff like this is, they'll say, you know, this is the lowest rate in the center. Like, I've never done this deal before. Like, man, you literally, they'll say things like, man, you're a really good negotiator. I mean, it's literally, I joke around, it's like a four year old wrestling their 40 year old dad. Like somehow the four year old manages manages to pin the 40 year old dad would never say things like that because they know that he called the carpet. But they'll say things like, well, you know, we don't do free rent here, or everyone has a four percent annual increase. Or if I do this deal with you, like, you gotta promise not to tell anybody because you'll have the most competitive lease rate. And they're just literally lying right to the doctor's face. You say, well, why do they do that? Because they can't. And then goes and tells Mom, like, hey, Dad, like, or I just be dad in a wrestling match and. The four-year-old is just like walking high. I mean, landlords will say stuff to these tenants, especially healthcare providers, that they would never say in a million years again to like a Charles Schwab or like a JP Chase Morgan or a Lockheed Martin, like pick your large Amazon, your large national company. They would and they want the money. Like they don't care about the doctor. They.

Know ego with medical professionals, especially certain types of docs where it's like, wow, you really got me pinned against a corner. And the doctor's like, yeah, I did. Another score for Surgeon Bob. Like it's one of those where literally you have no clue you're even being played until you have someone coming who's in. Would.

Never say things like that because they know that you call the carpet, but they'll say things like, you know, we don't do free rent here or everyone has a 4% annual increase or if I do this deal with you, like you gotta promise not to tell anybody because you'll have the most competitive lease rate and they're just literally lying right to the doctor's face. you say, well, why do they do that? Because.

They can't expert. And they would never say that. Wow, Colin, you guys really got our lowest rate. We never go this low. They would never do that crap. They'd feel, like, fine. Let's.

Just go with it, you know, if it's real. Yeah.

No.

And, and that's a great point. And we, we can tell we get their lowest lease rate because we start, I mean, they, they get emotional and they start getting upset and, like, I mean, we start getting landlords that, like, you would think these guys could control their emotions at a higher level, but they.

A lot of times can't. And so you can, and they want the money. Like.

They don't care about the doctor. Like, they know Ego with medical. It's a very different story when you start to really poke the bear. But another way you get there, too, is like, we go and interview other tenants. Like, we'll figure out what's going on. We'll look at, we'll look at vacancy rates. I mean, you get a landlord that's got.

You know, that's got two or three vacant units and professionals, especially certain types of docs where it's like, wow, you really got me pinned against a corner. And the doctor is like, yeah, I did another score for surgeon Bob. Like, it's one of those where literally you have no clue that you're even being played until you have someone coming in who's in. If.

You'Re in a lease renewal and you might, you might be giving them another.

Vacancy if they don't bring term expert and they would never say that. Wow, Colin, you guys really got our lowest rate. We.

Never go that are competitive enough. Like that's serious leverage. Like they don't want to go negative eight or nine thousand a month by, because, because they didn't give you enough free rent. Like you can leverage the loss factor or the fear factor of these guys can't afford to lose you. But.

Again, go this low, they would never do that crap. They'd feel like fine. Let's.

Just go with it, you know, if it's really. Yeah, no, and that's a great point. And we can tell we get their lowest lease rate because we start, I mean, they, they get emotional and they started getting upset. And like, I mean, we started getting landlords that you don't get there unless you have other options, you know how to.

Play the game and you know what's going on with the market. I looked a word up while you were talking right now called leverage because leverage is something that I didn't, we all hear this word. These are words that we all hear in business. and many people get a sense of it, so they just move on. Here's what the definition of leverage is, guys, because I learned this recently in great depth. Like.

You would think these guys could control their emotions on a higher level, but they a lot of times can't. And so it's a very different story when you start to really poke the bear. But another way you get there, too, is like we go and interview other tenants. Like, we'll figure out what's going on. We'll look at vacancy rates. I mean, you get a landlord that's got.

You know, that's got two or three vacant units. And that's when one of my friends was in a heavy negotiation over a $100 million deal. Leverage is the exertion of force by means of an object used. And that's like actual leverage, meaning like if you're using a lever. Finance is a different definition. But essentially, it's using something for maximum advantage. If.

You'Re in a lease renewal and you might be giving them another vacancy, if they don't, bring terms that are competitive enough. Like, that's serious leverage. Like, they don't want to go negative eight or nine thousand a month by. Because. Because they didn't give you enough free rent. Like, you can leverage the loss factor or the fear factor of these guys can't afford to lose you. But.

Again, when you have leverage, you have momentum and decision and capabilities that you wouldn't have otherwise. And it's not about. When we hear the word force in health care, we're like, oh, I don't want to be a jerk. It's like, that's not what it is. We're talking about leveraging the reality around us to get the best rate possible. We never want to get to the point where the people on the other side are feeling screwed. But that's what you're saying is that's not what they're talking about. Their modus operandi, in the vast majority of all cases, is to get the best rate possible so that they can make the most money off their people that are renting to them. So if we can leverage, if we can use leverage to to create a space of equality and to get a really good deal for all that's fair market value. That's what we mean by leverage. And that's where hundreds of thousands of dollars come into play. I mean, there's a, so it's interesting because as you're talking, I'm like, okay, private practice owners reach out to you when they want to buy a building. But.

You'Re also saying, reach out to you when they're ready to renew. You don't get there unless you have other options. You.

Know how to play the game and, and you, you know what's going on with the market. I looked a word up while you were talking right now called leverage. It's because leverage is something that I didn't, we all hear this word. These are words that we all Here in business and many people get a sense of it. So they just move on. Here's what the definition of leverage is guys, because I learned this recently in great depth. Yeah.

The number one transaction where health providers lose money at the highest level unequivocally are lease renewals. It's the number one transaction. And there's a couple of reasons why. Number one, most healthcare providers signed a bad lease to start. Like they did not capitalize. Like, you know, maybe they got a good deal or maybe they had great representation. That definitely happens. But the vast majority sign leases that are above market. 99% of all leases have an annual increase. So if you sign a lease that's two, three dollars a foot above market, and then you have above market annual increases. And then every, you know, for the nine out of the 10 years you release it, it ratchets up. By the time you get to that 10th year, you're way over market. Now you start out two, three dollars a foot above market. Now.

You'Re way over market and then they just sign off on their next lease renewal. That's when one of my friends was in a heavy negotiation over over a $100 million deal. Leverage is the exertion of force by means of an object used. That's actual leverage, meaning like if you're using a lever. Finance is a different definition, but essentially it's using something for maximum advantage. And.

So a lot of healthcare providers don't realize this. Everything's in play on a lease renewal. Free rents in play, renovation allowances in play, lower lease rates in play, And you have to ask the question, if you move out of the space, what is it going to cost the landlord to release that space? How long will it sit vacant? How much money will they lose when it goes vacant? How much time will it take to release it? If the new person needs a build out, how long will it be in a build out period for where they're not getting rent? And then how much free rent are they going to give? You know, what does it cost to do a new deal? And you add up all that amount of money and it's significant for landlords. So you know, that speaks to a significant amount of opportunity. But on the other side of the coin, landlords are going to... When.

You have leverage, you have momentum and capabilities that you wouldn't have otherwise. And it's not about... When we hear the word force in healthcare, we're like, oh, I don't want to be a jerk. It's like, that's not what it is. We're talking about leveraging the reality around us.

To get the best rate possible. Assume that you don't know what you're doing if you're a health care provider. If you haven't hired an agent, you're not serious about moving. So if you're just going it alone, and you say send me a proposal, that's the principle. We.

Never want to get to the point where the people on the other side are feeling screwed. But.

One of the biggest mistakes you could ever possibly make is say send me a proposal or what would you do for me? That instantly tells the landlord you have no clue what you're doing. And so lease renewals are the number one place where landlords just punish tenants. It's the number one transaction where they make significant premiums, 10, 15, 20% premiums that they would never make with a savvy tenant. And so yeah, leasing more tenants, more tenants and more healthcare providers, let me say, more healthcare providers lose money during a lease renewal than any other transaction. So it's really, it doesn't matter if it's purchasing or leasing, it's any transaction with a landlord or seller, you got to come with your A game and it's not going to be you coming alone. It's becoming with a savvy real estate agent.

Exclusively representing your interest that takes you to market and then the good- that's what you're saying is that's not what they're talking about. Their modus operandi in the vast majority of all cases is to get the best rate possible so that they can make the most money off their people that they're renting to them. So if we can leverage, if we can use leverage to create a space of equality and to get a really good.

Deal for all the- Associates on four or five properties on your behalf. That's.

Amazing. It feels like what people would do in your case is they would be developing more of a real estate strategy as part of their private practice. piece because when you niche the way that you do, you help people develop the secondary part of their business that they don't even know that is just tacking it on to what their main heavy lift is, which is their private practice. How do you operate with larger clients of yours that have multiple pieces? Multiple real estate pieces. Sorry, there's a guy that popped up over my window cleaning the window. That's fair market value. That's what we mean by leverage. And that's where hundreds of thousands of dollars come into play. So it's interesting because as you're talking, I'm like, okay, private practice owners reach out to you when they want to buy a building, but you're also saying reach.

Out to you when they're ready to renew. Yeah, the number one transaction where health providers lose money at the highest level. What.

Is going on? But like, you know, do you strategize with your clients? Like how do you help them develop? If they're really serious about wanting to expand multiple locations in real estate, like how do you work with those types of clients? Yeah.

We have a lot of clients that have multiple locations and we have lots of clients that have dozens. We have clients that have hundreds of locations. And we've helped clients go from literally zero to hundreds. And so it's the same thing. Every transaction gets the same amount of attention. It's not a matter of like, hey, you've got 10, we can only get to a few. Every transaction has the same evaluation. We look at what they're currently paying. We do a market analysis unequivocally our lease renewals, it's the number one transaction. and there's a couple reasons why. Number one, most healthcare providers signed a bad lease to start. Like they did not capitalize, like, you know, maybe they got a good deal or maybe they had great representation. That definitely happens. But, but the vast majority signed leases that are above market. 99% of analysis or we look at where they want to go and see, do a market analysis, and then we always negotiate on multiple properties. We'll look at options to lease, look at options to purchase. um, we'll look at it if they're in an existing space, we'll look at what would it look like if we relocated and bought a building or relocated at least a building. And then we always leverage and we always negotiate with multiple people, multiple people. Like that's the all leases have an annual increase. So if you sign a lease that's two, $3 a foot above market, and then you have above market annual increases. And then every, you know, for, for the nine out of the 10 years you release it, it ratchets up by the time you get to that 10th year, you're way over market. Now you start out two, $3 a foot above market. Now you're way over market. and then they just sign off on their next lease renewal. He is you cannot just ask a landlord for an offer. And then let's just say you get a little bit of movement. You ask, you start with one property, they come in at 30, you get them out of 28. Like, but still, you don't know compared to what? Like, what if the, the other two landlords down the street were I would be at 26, not 28. So just because you got one another to come off their lease rate, two dollars a square foot doesn't mean it's a great deal. It's better than it started, but it's still not it's still not able to be measured. And so a lot of healthcare providers don't realize this. You know, everything's in play on a lease renewal. Free rents in play, renovation allowances in play, lower lease rates in play. And you have to ask the question, if you move out of the space, what is it going to cost the landlord to re-lease that space? How long will it sit vacant? How much money will they lose when it goes vacant? How much time will it take to get to the market? So that's really the key. And so, you know, starting starting every transaction, if it's a lease renewal 12 months in advance, that's key to make sure you have enough time to complete the full analysis. And then actually, if you have to move or want to move or want to purchase, like that's really important. You know, that's, I guess I'm going to jump back into our previous question. Another top mistake healthcare providers make is they, they don't time it right. They've got two months left in their lease to release it. If the new person needs a build out, how long will it be in a, in a build out period for where they're not getting rents? and that how much free rent are they going to give? You know, what does it cost to do a new deal? And you add up all that amount of money and it's significant for a landlord. So, you know, that speaks to a significant amount of opportunity. But on the other side of the coin, landlords are going to, they're calling their landlord saying, you know, send me a proposal. That landlord knows this person has no ability to move. Like they've missed the window. They.

Lost their leverage. They lost their leverage. That's.

Exactly right. And so, you know, not timing a transaction properly or you get these people that call their landlord three years in advance and say, I want to renegotiate. There's no reason the landlord's gonna voluntarily just cut their cash flow because you called them and asked them. So timing a transaction is another kind of top five mistake is what assume that you don't know what you're doing. If you're a health provider, if you haven't hired an agent, you're not serious about moving. So if you're just going it alone, and you say send me a proposal, that's one of the biggest mistakes you could ever possibly make is say send me a proposal or what would you do for me? That instantly tells the landlord you have no clue what you're doing. And so lease renewal and so having that proper timing and again, this is probably the top takeaway or one of the top takeaways. Landlords do not move unless there is a fear of loss. Simple as that. Landlords.

Don'T move unless there's a fear of loss. Yeah.

And I'll prove it to you. If you were going to sell your own house, like tools are the number one place where landlords just punish tenants. It's the number one transaction where they make like significant premiums, 10, 15, 20% premiums that they would never make with a savvy tenant. And so, yeah, leasing more tenants, more tenants and more healthcare providers, let me say, more healthcare providers lose money during a lease renewal than any other transaction. And you're going to sell your house, let's say you're going to sell your house for $1,000,000. you're not coming down to 800,000 unless you think that's the only way you can sell it. Like if you think you can sell it at a million, you're gonna hold firm. If you think you sell at 950, you come down to 950, but you're not going from a million to 800,000 unless you think that's the only way you're gonna sell your house. It's the same thing for landlords. They're not gonna lower your lease rate. They're not gonna give you a huge free rent package. They're not gonna give you a bunch of.

Money to renovate your space unless they believe they have to in order to make the deal. Amazing. So this has been such a phenomenal episode. I really did. We get a lot of requests to be on the show. I looked at yours and I went, hey Kim, we've got to fit Colin in. Because I think that, you know, our big focus on the podcast is helping private practice owners create financial freedom as well.

As other types of freedom. But there was no option. So it's really, it doesn't matter if it's purchasing or leasing, it's any transaction with a landlord or seller. You've got to come with your A game and it's not going to be you coming alone. It's becoming with a savvy real estate agent. exclusively representing your interests that takes you to market and then negotiates on four or five properties on your behalf. That's.

Amazing. It feels like you're, it feels like a greater freedom producer on the financial end for me than selling my business with owning the building. That was so huge. And I didn't have someone like you helping me along the way. And I do have something I want to talk to you about personally after the, after the show real quick. But one of those things where people would do in your case is they would be developing more of a real estate strategy as part of their private practice piece. Because when you niche the way that you do, you help people develop the secondary part of their business that they don't even know that is just tacking it on to what their main heavy lift is, which is their private practice. How do you operate with larger clients of yours that have multiple, like this isn't a cool thing, this is a game changer thing, and doing it with the right professional is so huge. I have a question that I know they're all asking internally, which is like on the real estate side, when it comes to residential, they know how people get paid. How do commercial real estate agents get paid? Yeah, that's the beauty of our industry is that- Pieces. Do you- Multiple real estate pieces. Sorry, there's a guy that popped up over my window cleaning the window. Like, what is going on? But like, you know, do you strategize with your clients? Like how do you help them develop? If they're really serious about wanting to expand.

Multiple locations in real estate, like how do you work with those types those clients. Yeah, we have a lot of clients that have multiple locations and we have we have lots of clients. It's it's set up to where the landlord or the seller is going to pay the commission, I'd say literally like 99% of the time. So if you're in a residential transaction and your clients have dozens, we have clients that have hundreds of locations and we've helped clients go from literally zero to hundreds. And so it's the same thing. Every transaction gets the same amount of attention. If you're selling a house, you hire an agent to list your property. and you pay the listing agent a commission and it's not a matter of like, hey, you've got 10, we can only get to a few. Every transaction has the same evaluation. We look at what they're currently paying. We do a market and now have a money, or you have a commission set aside for the buyer's agent too. If a buyer shows up unrepresented, the listing agent gets double commission. Same thing in commercial. If you go to market without an agent analysis, or we look at where they want to go and see you do a market analysis, and then we always negotiate on multiple properties. We'll look at options to lease, look at options to purchase. We'll look at if they're in an existing space, we'll look at what would it look like if we relocated and bought a building or relocated at least a building. And then we always leverage and we always negotiate with multiple people. Like that's the listing agent gets a double commission or the landlord just keeps that money. You don't save money. And that's a misnomer. A lot of people think, well, if I do it myself, I'm saving commissions. no, you're not the payer of the commission. If you own the building, you could save money by not hiring an agent. That is you cannot just ask a landlord for an offer. And then let's just say you get a little bit of movement. You start with one property, they come in at 30, you get them out of 28. Like, but still you don't know compared to what? Like, what if the, the other two landlords down the street were I would be at 26, not 28. So just because you got one another to come off their lease rate, $2 a square foot, that's one way to say that. But if you're a buyer or a tenant and you go unrepresented, all you did is just forfeit basically like free representation, you know, and wasted a lot of time and energy and probably got a really bad deal. And yet you didn't the insult to injuries, you didn't get any savings. Like you lost the savings you could have got and it would have doesn't mean it's a great deal. It's better than it started, but it's still not it's still not able to be measured against the market. So that's really the key. And so, you know, starting, starting every transaction, if it's a lease renewal 12 months in advance, that's key to make sure you have enough time to complete the full analysis. And then actually, if you have to move or want to move or want to purchase, like, that's really been paid for by the landlord or the seller. So it should not cost you any money to hire an agent. It should be a service that's provided, and they're going to get paid for their service. But it's going to come out important. You know, that's, I guess I'm going to jump back into our previous question. Another top.