Hopefully your business is slowly
starting to get healthy again. While you continue to work hard, take a few
minutes in thinking about your space and what it could be doing for you that
it is not already.
Now if the perfect time to start making those
plans as the market is still soft. Property owners are thinking creatively
like never before. Consider the possibilities for the future!
Best regards,
Rob Cassam
Carolina
Realty Advisors
704-442-1774 Ext. 100
|
|
Take Advantage of the Times By Using a Purchase Option |
|
Imagine negotiating and moving into the perfect property for your business
today and buying it several years from now! This can be possible using a
lease agreement with the option to purchase the property in the future.
A purchase option is a unilateral agreement that one has with the owner of a
property where the tenant (in this case) has the right but not the
obligation of purchasing the property. This can be a great situation
for several reasons. Here are some of the benefits.
1.Very Low Down
Payment (aka option fee) (1% to 2% vs. 10% to 30%).
2.No Loan
Qualification Necessary Up-front.
3.Rent Money Is Working For You (in
the form of a Rent Credit).
4.Option Consideration Is often Credited
towards the Purchase-100%.
5.Price Is Usually Locked In Up-front.
6.Profits From Any Appreciation (good down market strategy).
7.Time To
Check Out The Property (and make sure the roof really doesn't leak).
8.Time to Check Out the Area and Employment Base
9.Time To Obtain the
Best Financing (No pressure, no rush, no bank financing up-front).
10.No
Taxes To Pay (Libertarians love Lease Purchasing).
11.Buys Time To
Develop Credit or Develop Needed Down Payment
12.Quick Move In Time (No
Lengthy Closings or Mortgage Approvals. )
14.Rents are Negotiable
15.Tenants/Buyers May be Able to Sell Their Option In the Future!
Owners of property like the idea of a tenant who is making a commitment to
buy the property. They like knowing that they will have a cash flow for a
time under the lease, and get their equity out at the end when the tenant
exercises their option. However, do not expect to get the option for
free. Many owners will want non refundable option consideration in order to
give you all of these benefits.
|
|
There Is No Such Thing A The Perfect Space |
Once you have decided you need a new space for your business, your work really
is just beginning. Here is what to do.
First conduct
extensive market research intensive enough to do the detective work thoroughly
investigating all alternatives and leaving no opportunity uncovered.
Make sure your search covers the following areas: vacancies, rental rates
(current), effective rates (long-term), building expenses, leasehold improvement
costs and demographic information (if applicable).
If you do this
correctly, this process should include:
• Develop availability study of
buildings.
• Visit the different local market and conduct examination.
•
Examine public domain information, such as: Office guides, market research
reports, trade publications, chamber of commerce material, on-line databases,
economic development committee analyses.
• Gain market intelligence from wide
variety of sources, including: Local brokers, developers, lenders, corporate
real estate executives, business leaders, industry trade groups.
• Evaluate
all facilities that are consistent with your requirements, as well as “hidden
opportunities”.
• Catalog fact sheets on buildings, photographs, floor plans,
location map, transportation accessibility and competitors in market.
• Make
sure you have information on demographics, traffic patterns and location
analyses(if applicable to your business).
While you are looking, keep one
thing in mind:
THERE IS NO SUCH THING AS THE “PERFECT” SPACE!
You
certainly want to make sure that the space that you lease meets your needs, but
you will drive yourself crazy if you go through dozens and dozens of properties
searching for the “perfect” space.
Make a list that includes your price
range, all the items you must have in your facility, along with the items you
don’t want. Take it with you whenever you look at homes, so you don’t get
sidetracked.
You will want to thoroughly research the different
offerings in your target area. You need to know what people are asking for their
lease rates, and most importantly, what they are getting for it as well as their
total lease structure. You want to be on the lookout for and avoid problem
properties.
Although you certainly don’t have to use one, the services of
a good real estate tenant rep broker can be quite valuable during this stage.
They can help you with this part of the process.
Once you have a list of
spaces that you are interested in, you need to find out more information. There
are several questions that you must ask the landlord before you start any
negotiations. You need to know as much as possible about the landlord’s position
and motivation.
This is done in a formal process with a “RFP” or request for
proposal.
This documents asks and gets answers to important questions
like:
Who owns the building?
How is the size calculated and how what will
the rates be based upon?
Who handles utilities?
Who handles maintenance?
Who handles common area costs?
What about taxes and insurance?
What about
the ADA act?
What about tenant improvement allowances?
What about all
those legal lease terms like exclusivity, assignment and termination?
When
you have answers to these questions, you will have a good feel for the overall
terms of the lease. You’ll be in a position to decide if you want to move
forward with this space or not.
ANALIZE THE VALUE
If everything looks
good, you may want to proceed in the process. The next step is to make sure you
understand how the complete offering will work.
This is where the
information you learned from the RFP can be quite useful.
There are many
different strategies for negotiating, but the one that I have seen produce the
best results is not all that difficult. It starts by studying the market data to
determine what the fair market value is for the space.
Your objective is
to make your offer at a price that is lower than what the landlord has in their
mind as their “bottom line”, but is close enough that they say, “Oh, I guess we
will go ahead and take it”.
Keep in mind the three basic options that a
seller has when presented with an offer:
1) Accept the offer.
2) Reject
the offer.
3) Make a counter offer.
This process goes back and forth
typically.
The rate is always the focal point of the offer, but there
are lots of additional areas that you need to address and pay close attention to
also. In your offer, be as specific as possible about every aspect of the
transaction. Details that are not clear or are left out can lead to big problems
down the road.
Spelling out every detail can save lots of confusion and
misunderstandings, and keep you out of a costly court battle!
One area where
you need to be especially careful is termination provisions and duties. These
are things that must or must not happen in order for you to exit the lease.
Determining the total cost of the lease and comparing it to the other
targeted proposals allows you to make an apples to apples decision. Keep one
important fact in mind: There is always another space- so long as you have time
to find it!
If you start to feel pressured or uncomfortable, step back
and review your goals. Don’t let yourself be bullied around. Remember that the
landlord usually needs to lease that property a lot more than you need to lease
it!
NEGOTIATING THE CONTRACT
After all of the terms and conditions of
the contract have been mutually agreed upon by both you and the landlord, you
still need to stay on your toes. Many people tend to relax and end up dropping
the ball. There are at least a hundred things that can go wrong and foul up the
transaction.
This is where you take what was agreed upon informally and
transferred to the lease, that is the lease you will be signing to “close” the
transaction.
You will want to make sure that all of the terms of the
lease have been met, including the build out (renovation) agreement.
All of
your preparation and planning will pay off handsomely when you move into your
new space!
Once the lease has been signed and the build out has been
completed, you are ready to really move! WAIT, what about the move?
That is
the subject of another discussion. Pre-move planning should be take place when
you are deciding to move or stay. Again, a good tenant rep broker can help you
with the pre-planning move and the actual implementation of that move as well as
other important items like phones and data lines. DON’T FORGET THIS!!
|
|
Neurotic people can each cost society $22,000 a year
NEW YORK (Reuters Life!) - Neurotic people aren't only
making their own lives harder but they also cost society billions of dollars
in health care spending and lost productivity every year, according to Dutch
research.
Researchers from the VU University Medical Center in
Amsterdam analyzed the cost of being neurotic and found while the least
neurotic individuals cost society less than $3,000 per year, the most
neurotic people cost more than $22,000 a year.
Neuroticism -- a
proclivity toward worry, anxiety and emotional ups and downs -- is
considered to be a personality trait with genetic roots, and is strongly
associated with several types of mental illness, including depression,
anxiety and schizophrenia.
"We thought that economic costs would be a
good way to assess the overall impact of neuroticism," researcher Dr. Pim
Cuijpers told Reuters Health. "We were surprised that the impact was this
large."
While research has looked into the economic costs of
individual mental disorders, most studies of neuroticism have focused on
just one disorder or aspect of mental health, Cuijpers and colleagues said
in their study published in the Archives of General Psychiatry.
For
their study they looked at about 5,500 adults and examined their medical
costs and the amount of days they were absent from work to come up with an
annual figure (in dollars).
They assessed neurotic traits using a
14-item scale crafted from a personality inventory questionnaire used widely
in the Netherlands.
The researchers found that the average cost for
people who scored in the top 5 percent based on neuroticism was $12,362
above the average for the population.
Excess costs for people in the
top 10 percent were $8,243, while costs for the 25 percent who scored the
highest on neuroticism were $5,572.
The increased costs associated
with neuroticism were "considerably higher" than those for associated mental
health problems, for example mood and anxiety disorders, substance use
disorders, and somatic disorders (meaning psychologically related physical
problems), the researchers said.
For example, common mental disorders
cost an extra $600 million per million inhabitants, they estimated, compared
to nearly $1.4 billion for neuroticism.
This is largely because there
are so many more people with some degree of neuroticism than there are
people with mental illness, Cuijpers said.
Cuijpers said the findings
show that personality affects not only the individual, but society as well.
"If this is realized as a common understanding, there are many levels at
which these problems could be reduced," Cuijpers said. "For example,
employers can develop a good mental health climate, and mental health
services can be included as basic needs in health care in general."
(Reporting by Anne Harding, Editing by Belinda Goldsmith)!
|
|
Contact Information |
|
|
|
What I do... |
|
I
provide
real estate brokerage services for small and medium sized businesses, investors,
and individuals who are fed up with loosing money, paying too much, spending too
much time not getting the right piece of property for their particular
situation.
I act as the quarterback in the real estate transaction for my clients who coach
me in managing all of their different needs.
My clients love not needing to worry about making bad decisions or bad
investments and love winning negotiations.
Ask yourself these questions:
What types of growing pains is your company facing with your location?
Are rising occupancy costs a challenge your company is facing?
Is having too much space or not enough space a challenge your company is
facing?
How much of a problem is dead equity in your property for you?
How long are you prepared to go on doing nothing about situations in
your business that are not quite right?
Give me a call, I may be able to help with your lease or purchase!
|
How To
Lease Commercial Property |
|
