E727 | Commercial Real Estate Mistakes To Avoid

In this episode, Dr. Danny shares valuable insights for physical therapy entrepreneurs looking to secure their own standalone office space. He emphasizes the importance of using a commercial realtor to negotiate lease terms on the tenant's behalf, saving them from costly mistakes and potential legal fees down the line.

Dr. Danny also stresses the significance of looking at multiple potential spaces before making a decision. By exploring 10 or more options, entrepreneurs can leverage competing offers to secure better terms and ensure they start with the best possible arrangement for their long-term success.

Furthermore, Dr. Danny cautions against taking on too much with a complete build-out of an empty space. He advises new entrepreneurs to consider a location that already has necessary features in place, such as a bathroom, to avoid unexpected delays, expenses, and stress associated with a full build-out.

By following these recommendations, physical therapy entrepreneurs can navigate the process of securing their own office space with confidence and set themselves up for a smooth transition into their dedicated location. Be sure to tune in to this episode for more expert advice and practical tips from Dr. Danny.

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Podcast Transcript

Danny: Because once you start looking for spaces, if you've already contacted landlords, you can't add them after the fact. And if you do, then you have to pay their commission out of your pocket, which is typically pretty expensive. It can be a few months of rent. The whole contract of of your rent, a percentage of the rent is typically how they break those up.

Hey, are you a physical therapist looking to leverage your skillset in a way that helps you create time and financial freedom for yourself and your family? If so, you're in the right spot. My name is Danny Matei and over the last 15 years, I've done pretty much everything you can in the profession. I've been a staff PT, I've been an active duty military officer, physical therapist.

I've started my own cash practice. I've sold that cash practice. And today my company, physical therapy biz has helped over a thousand clinicians start growing scale, their own cash practices. So if this sounds like something you want to do, listen up, because I'm here to help you. Hey, what's going on? Doc Danny here with the PT entrepreneur podcast.

And today we're talking a little bit about real estate and a little bit about Your own standalone space and a couple of mistakes that I have seen that I wanted to address that I think are important to keep in mind as you look at either number one, moving into your own standalone space.

So non sublease space or potentially expanding into a bigger space. This is a interesting environment. With office space has been really beat up the last couple of years as a lot of industries have gone More remote, right? So you have traditionally office based jobs that maybe now they're doing more of a hybrid model.

So a lot of companies are moving to two days a week in person, three days a week in person, maybe two to three days remote. And because of that, you're seeing a lot of companies downsize logically, right? Like they don't need to carry that overhead. They don't need all that space and traditional office complex.

So complexes I've just gotten crushed, especially in more like suburban environments. So what does this have to do with you and your practice, right? In, in this, in, in this sort of context, in this environment of where we're seeing office space become less desirable, it means that you should be able to get more space for less money, or you should be able to get the space size you're looking for less money.

Now there's always going to be location specific differences. Let's say you are in a really desirable heavy foot traffic sort of retail area. You're probably not going to get much of a, a room to negotiate there. You're not going to get a great deal there. But, in adjacent areas to that, maybe in areas that are still like.

Good, solid areas for your practice to be in, but maybe they're not as strong of a retail space. You're going to really be able to negotiate a lot more than you think. I've had a few conversations in the last week, just with mastermind members that we have, that we're working with that are moving into newer buildings, whether they're expanding or they're moving to their first standalone space.

And for a lot of them there's two mistakes that I see people making that I wanted to really, put on your radar and make sure if you're doing this, you're not doing the same thing, right? Because you have a really cool opportunity to put yourself in a solid space for you know The next 5 10 years with a lease and maybe some of that bounces back Maybe it doesn't either way you're gonna put yourself in a great spot to have the footprints You need to treat people in person So the first mistake that I see people making in this environment in particular and really just generally shouldn't do this Is Not using a commercial realtor.

And I know this from personal experience, because whenever I went and looked for my first single in space, I didn't use a commercial realtor because I didn't understand how they're paid and why I would need one. Commercial realtors are paid based off of the landlord paying them a finder's fee, basically.

And they work and negotiate on your behalf. If this is a pretty straightforward lease, they should be able to help negotiate, the terms of your lease without necessarily needing to get some. Legal folks involved. If you don't have to get a real estate attorney involved, then that's great because they get pretty expensive.

And in some cases, if it's like a really big lease or you're worried about, or you're getting a lot of tenant improvement build out or something like that, maybe you want to bring one in, but oftentimes you don't need that. And in my experience working with. Really any attorney, it's you want to use them, you want to use them, but you want to use them when necessary and not when you don't need them because they can actually add a lot of complexity and cost to some of these things versus if you have a a realtor that is a commercial realtor, their job is to find these spaces and they negotiate these things all the time, right?

So if you have anything like very specific or that maybe is a little bit different than the norm, then yeah, maybe you want to get healthcare attorney involved or a real estate attorney involved. If you don't have that, then your realtor should be fine. But not using one is a big mistake because once you start looking for spaces, if you've already contacted landlords, you can't add them after the fact.

And if you do, then you have to pay their commission out of your pocket, which is typically pretty expensive. It can be a few months of rent. The whole contract of. Of your rent, a percentage of the rent is typically how they break those up. You could be out thousands of dollars.

That's not something you want to do if you can help it. So make sure you're using one from the get go look at spaces. The second thing is not looking at enough spaces. This is. I listen, you're busy. I get it. I'm busy. Everybody's busy, but you really should be looking at 10 plus spaces for commercial space before you decide on which one that you want.

And the reason I say that is we can get locked into the first couple of things that we see. And also you don't have much negotiation leverage if you just are looking at one place, right? Because you can go back and forth and say, okay, we're looking at this other space, but they're willing to give us that.

This amount of tenant improvement. If you can match that, then, we're in, if not, then we're going to go with this other place. And it gives you leverage to be able to negotiate better for the space that you're going to get. And you got to keep in mind, if you're going to be there for, let's call it five to 10 years.

And you're going to build that into your lease, right? You want to start with the best sort of lease arrangement that you can, because normally in these leases, they escalate your rent to some degree every single year, or maybe you have to cover the change in their, their taxes or whatever it is that they, Put into the actual lease and they can be different in each area, but the better of a position you start in, the better you're going to be longterm as well, because that percentage of increases based on wherever you start.

You want to try to negotiate that as best you can. And if you have multiple spaces, you really have much, much better negotiation power. That's the two big things that I'm seeing right now. The last thing, and I'd say this is a A caveat to this would be if this is your first space is if this is your first sort of build out that you're going to do for a standalone space, try to find something that is going to be semi already built the way that you want.

One of the big mistakes or challenges I should say with a, just a shell of a building is we underestimate costs. And we underestimate how long it's going to take, but really it's going to be a lot more expensive than you think. And it's going to take a lot longer when we did our build out.

We basically had what I would consider an empty shell, but it had a bathroom in it, luckily. So there's already a bathroom in it. And so we didn't have to build that, but we basically had to enclose all these other places that we wanted to enclose and build out the whole space. And it took us twice as long and literally cost twice as much as we we were quoted.

And that's pretty normal, honestly, from what I see, maybe not twice as much, but it takes longer than you think. And it's going to cost more money than you think. So before you take on a big build project, if you can look at spaces and find something that is. Pretty close to what you want. And you can make small modifications.

Maybe you don't even have to pull permits that are going to take a long time that can put you in a way better place. And it's going to save you a lot of stress. So if you're newer to looking at, building into a standalone space, highly recommend you look for something that is at least close, somewhat close to what you're looking for and not necessarily just like a blank slate.

And as cool as that project might sound. It is a difficult thing to pull off if you've never ever had experience with contractors or managing, any of the build outside associated with permitting and your fire marshal and all that goes into making sure that you're in regulation with the new space.

So those are the big things. Make sure that you are using a commercial realtor. Make sure you're looking at enough spaces. Don't go just with the first one that you see, test a few out. And then the last thing would be to. Make sure you're not taking on more than you should. If you have just a complete build of a shell of a building look for other spaces, find something, if you can find something similar, similar to what you're looking for, at least that is that has some of these things in place, especially if there's like already a bathroom, those are really big expenses, try to see if you can make a space like that work before you go all in on a shell build, which sounds exciting, but can definitely be a challenge to to actually pull off.

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