do you remember being 16 maybe 17 years
old you’re living with your mommy and
your daddy and every time you wanted to
do something your mom and dad would say
we pay the rent here you do what we tell
you to do well when they turn 18 and you
get your own apartment complex you live
in your own place privacy all this stuff
it feels good doesn’t it the same goes
with you as an entrepreneur when you
finally go and sign your own lease and
you feel free because this is your
business this is your place of operation
you get to do what you want to do with
your business now prior to doing that my
goal today with this video is to make
sure you are as equipped and educated
about signing the lease because I think
after watching this there’s not really a
book you can read about leases and other
because it would never sell that many
copies but in this video my goal is for
you to know exactly eight through Z what
you need to know as a tenant with the
brokers motivation the landlord’s
motivation everyone’s motivation so when
you go into it you’re educated you don’t
get ripped off you get the best deal and
get the best possible thing for yourself
so today’s video is directed to three
different types of people one you don’t
yet know if you’re going to have an
office one that you’re an entrepreneur
you just want to get educated about
office leases great – you’re about to
send your first office lease and you
don’t know what you’re doing or three
you already have your own office lease
but you want to know if you did it right
or wrong so the next time you don’t make
the same mistake so I want to know
everything I talked about in this video
is from many mistakes I’ve made and many
leases up signs I’ve signed millions and
millions and millions of dollars of
leases over my career and I started off
small and build it to what it is today
so let’s get right into a few things you
got to keep in mind as you’re about to
sign and office lease first things first
let’s solve for x1 how much space do you
need realistically how much space do you
need and when you think about how much
space do you need not how much space do
you need today because if you can assign
a 36 month lease
it’s almost asking yourself how much
space do you need twelve to eighteen
months from now because you need a
little bit of room for you to outgrow
your office but you don’t want it to be
way too big you don’t want it to be way
too small you need to plan for 12 to 18
months number two location what do you
want it to be does it have to be near a
freeway does it
if it’s in your freeway do you want it
to be in a place where all the traffic
comes in do you want it to be in a
shopping center where it’s right by the
mall do you want it to be in a mall what
do you want it to be where is it
suitable for you as a location through
the affordability what can you afford
what is the number that you can afford
right now and the way to calculate this
is how much money do you have set aside
so if your expenses are going to be
$4,000 a month and you take your
personal expenses whatever it’s going to
be do you have that saved up for six to
twelve months because they can ask you
for a first month last month sometimes
they ask you first second and last month
it depends on if you have experiences
how you negotiate and keep this part
amount anything when it comes on to
commercial real estate it’s all
negotiable all of it there’s so many
creative ways to do it no two deals in
commercial real estate are ever the same
number four turn 12 months 24 months 36
months what is your terms five is
traffic do you need parking so meaning
is there going to be a lot of employees
I going to be parking their car do you
want it to be the type of parking where
it’s dollar 20 per hour that people come
in and the gate goes up do you need
security what is it that you’re looking
for would parking for traffic meaning is
it a place that a lot of customers are
going to come in if it is then you need
a nice office space if it’s not who
cares if they’re not going to see it
because it’s a call center there’s not
really going to be any in you know
customers that are going to come and buy
from you so you need to know that
because it’s a big difference on price
point they get to save and I last but
not least legal you always want to
whatever you do whatever deal you get
even if your commercial real estate
agent your broker says I’m gonna have my
legal look at it I always recommend you
spend two to four hundred dollars to
another attorney that’s not emotionally
attached to him because to them their
attorney is going to look at the deals
that benefits you but still at the same
time it’s the deal that’s happening here
with the broker get an on interested
attorney to look at the entire deal
before you do anything so a couple basic
things about office space you got
basically three different types of
office spaces you’re going to get if
you’re running a commercial office space
type a Type B type so you keep hearing
about this so people ask what is typing
what is type of type C type a is newest
building it was built in 2009 in the
most traffic place community its type a
Type B maybe some
little older but it’s in a decent
community so what’s built on 1981 but
it’s in a decent community could be type
II still presentable spoke clients can
come install customers can come in but
it’s not the sexiest then there’s type C
type C is oldest worst location not a
desirable place it’s type C by the way
I’ve had a type C type B and a type A
office I know all of them and I know
exactly what the benefits pros/cons
pricing wise it is to go in each one of
these things so you need to know about
that now let’s talk about rent a lot of
times you’ll hear this language about
single net double meant triple net
full-service schools Pat what does this
really mean when the commercial real
estate agent starts talking about this
I’m kind of confused so a couple of
things to keep in mind you rarely will
see single net being done this is when
the landlord pays the entire rent this
is when landlord pays the entire rent of
entire expenses so for instance if you
have taxes insurance and maintenance
they’re covering all that you’re not
paying any of that it’s all on them
they’re saying we’re willing to take
single net you’re not going to find that
a lot maybe in another country you live
in
you’re not going to find out a lot in
America double net is where you’re only
paying taxes and insurance triple net is
you’re paying taxes insurance and
maintenance and an obviously
full-service gross you’re paying one
check it covers everything full-service
gross kind of works out that way as well
so I’ve done all of them myself
typically commercials going to be double
or triple net that is very common to be
hearing debt so now credit wise credit
wise my first office lease I sign I’ll
never forget this I was in an office
that I was renting from other people and
this place was horrible for me because I
couldn’t grow I had no control it was
driving me insane and I had no authority
to say anything about the office that I
had so I want to do this no it’s not
your office I want to do that now kind
of like the whole thing with living with
mommy and daddy we should have all the
right to do that so one day I made a
decision I’m saving money I saved my
money one night I’m talking to one of my
agents guy named Oscar if he sees the
field remember this I said Oscar I want
you to put me in front of somebody he
says I don’t think this is for me I’m
having a hard time with sales and this
is that he wanted to go become an agent
for sports athletes which eventually he
did he became an agent for famous soccer
players he said I’m just not good in
sales and I don’t know if I came that’s
it introduced me to one person
before you say this isn’t for you so
that night we get in this Volkswagen we
go to Granada Hills I go to this type-c
office building and we go into this
place and the guy we meet is a guy named
Shane and I walk in the entire places
dark this is Oh 708 mortgage crisis has
already taking place this guy was
killing it he no longer is and I go to
his office we end up doing all this
investment saving insurance all this
other stuff and at the same time I said
what’s going on with this office this
man I can’t do anything with this office
I said what’s your plans with the subs
I’m trying to lease this out to somebody
I knew my credit was bad credit so I
knew a building is not going to give me
a direct lease so I have bad credit
I need a sublet we started talking he
and I I remember vividly what price
point I got what I paid for it how it
worked out so I got the lease away from
him I paid for the rent I paid for the
lecture I paid everything he ended up
getting a good deal because I don’t know
what I was doing at that time released
but I ended up getting a good deal
because I didn’t have a whole five year
lease that I sign I got a shorter sign
and it worked out for me because I don’t
have good credit so allowed me a way to
build credit with a building and start
moving myself up in business and all
this other stuff so that worked out for
me stay there crew incredibly well until
eventually we got evicted out of that
office because we grew extremely too
fast and then I have to go and get my
next office space but let me get into
the next point I want to make you here
so motivation motivation this is very
important for you to know what is your
motivation
what is Brokers motivation what is the
building owners motivation extremely
important you understand this part and
what relationship you play I coach
entrepreneurs all the time about this
here okay so hear me out first of all
what is your motivation your motivation
is to get exactly the amount of space
you’re looking for with exactly the
floor plan you know the way you want it
to be done which means Ti you’ll hear
this terminology t.i that means tenant
improvement you want them to set up the
office in the way that you want it to be
set up without extending the lease too
far okay so you want it to be three
years with p.i with office setup the way
it is with
lowest amount of expenses your pain and
that’s your motivation as a as a person
that’s getting an office space now let
me take the broker brokers go with you
some of the brokers are going to watch
this we had who was these brokers that
showed up the other day real nice guys
rep for brokers came they said value
Tama followers if they’re in our
building they showed up out of nowhere
for classy guys and I’m talking brokers
can be watching this right now and I
highly recommend you guys share this
with other commercial real estate agents
brokers Commission works this way the
longer the lease the bigger the space
the higher dollar per square feet the
bigger their pay they let me simplify
the math for you let’s just say you
speak the space you get it’s three
thousand dollars a month and you sign a
36 month lease 3,000 times 36 is 108
thousand dollars the Commission
typically is 6% 6% on the 108 is 6000
480 let me tell you how the six thousand
480 gets split and who pays for it
half of it goes to your real estate
agent that you don’t pay for the
building owner pays for the other half
goes to the broker that represents the
building owner so one your broker gets
half of this and the building owners
broker gets the other half so 3200 goes
to your broker 3200 gets to the building
owners broker you don’t pay for it they
pay for it now if you’re on the complete
opposite side and your subleasing your
space to somebody else you are paying
the six thousand 480 to the two because
now you’re becoming the lease
owner not them keep that part amount now
let’s talk about the broker relationship
I’ve had many different brokers in my
career and they’re they’re pretty
interesting one personality I had let’s
call this guy how kook I would call this
guy probably the sleaziest commercial
real estate agent I’ve ever dealt with
in my life and so let me tell what
happened with this guy he came in and I
told them at the time when we signed
this lease I told them I signed this
lease that was a six-year lease I told
him I only need it for three years
because I’m moving to Dallas Texas
he knew it so he came
and he pushed and said why don’t you
take this part for three years and take
the other part for six years but what
we’re going to do is we’re going to put
a cancellation on the 36 month so we can
make this work and cancel it and then
you can go to Texas because that’s
what’s going to happen no problem so it
came to we sign everything the contract
ended up being a million and a half or
two million dollars so do the math here
on 6% okay he made I think eighty four
thousand dollars or some number like
that I was paid out he made a lot of
money the guy that was working the least
that time with him later on came back
and said everybody hates working with
this guy everyone left that guy even
left him because the way he handled the
whole thing now watch what happened
experience with this broker he did it
with his own commercial real estate
company so he called himself john doe’s
look how cooks realty let’s just say
hypothetically that’s the name of the
company okay so he called this company
the name he was the only employee when
it came down to the three years that I
had to leave to Texas he wouldn’t answer
my phones he wouldn’t call me and he
told me he had a heart attack so then I
went to the lanthorn I said wait a
minute this guy told me had a heart
attack and another guy named Tony told
me what he talked money he never had a
heart attack
he was just shown a property this week
so then he says I can’t help because my
wife told me not to help you this guy
disappears obviously a crook and the
whole story one telling you this in
business is you’re going to face guys
like this and I call them the way it is
I kind of been never forget I call them
the waiters with how this guy handled
the entire deal this is the point I’m
making to you my suggestion don’t get a
broker that is not tied to bigger
company I would much rather hire
somebody that’s tied to CB Richard Ellis
that’s a very big company and know that
if my real estate agent ends up quitting
in the industry I can always go to CB
Richard Ellis and saying I need your
help for your attorneys to look at this
and help me bail me out out of this
because this guy was a nobody and a
one-man shop I got stuck with this lease
okay so I ended up painted the whole
million and a half you know two million
dollar lease whatever was we’re good to
go because we’re going to hold our
commitment but that’s the broker side
now let me give you another guy name
another guy name I had guy named Jared
absolute stud
he made one mistake he took one lease of
mine that he said he knows the glendale
market very well he didn’t so you need
to know whoever your broker becomes what
city their experiences listen brokers
are salespeople they’ll tell you they
know everything about every market they
do not everybody has a specialty so ask
him what is your special to what market
what city what zip code let them tell
you if they tell you everywhere don’t
believe it it’s a lie
ask him give me specific zip codes that
you work very well so find commercial
real estate agents that are dominant in
the specific zip code that you are
trying to get an office space or lease
your office space to somebody else so I
like Jared he was a hustler he worked
hard he answered he was all good he just
took one badly so I gave him a lot of
leases I think he’s done four or five
six seven eight ten leases with us good
guy now let me give you another relation
about brokers you got to know about so
just so you know the building owners
broker and your broker I know this is
going to sound strange and the
commercial real estate agents are going
to think of me I’m crazy when I’m saying
this they’re on the same damn team
they’re on the same team
do you know why what do you think they
both want to happen to close the deal
and how big of a list you want both do
you think both didn’t want it to happen
as big of a lease as possible square
footage-wise as high of a number as
possible as a longer term as possible
makes both of them more commissions so
the only people that are on the same
team are the building owners broker and
your broker I know this is very weird
but that’s exactly how it is even if
that broker tells you that’s not right
that’s exactly how it is okay so the way
they talk to each other they go like
this they go and say hey what do you
think this is a bad nuts that all this
stuff that you use the negotiation
language what is this loan well you know
him voice yeah we’re duty like this
makes obviously like the space so what
are we going to do they go talk they
strike up a deal then you sign the lease
let me tell what I’ve got them to do and
then they come and talk to you okay just
know these two brokers are on the same
team you got unsend that part nothing
wrong with that but don’t be naive and
thinking your own broker is fully on
your side they want a longer lease to
make more money on it so now let’s go
into the building owner building owners
trying to keep this property because
they’re building equity every year
somebody else is paying to rent
them to the building they own they’re
building more equity long-term they’re
building a bigger portfolio the more
income comes in to more properties they
can leverage the more assets they can
leverage
they’re simply running the capitalistic
system they’re doing their part they
have no involvement
except for leasing making sure 100
percent of the office space is being
rented out so an office space that’s
above 90 percent they don’t need you
that bad in office space that’s less
than 70 percent they need you
tremendously so it’s always good to ask
what percentage of this office is
occupied already they’ll say I will run
70 percent so on your side over at 92
percent it’s on their side so if you
really want to be in that building
you’re going to pay premium note that
position and occupancy what is the
occupancy rate in the office right now
in this building right now they’ll tell
you so I’ve worked the leg directly with
building up building owners I’ve worked
with bigger building owners where I only
dealt with the broker but regardless you
kind of want to know what’s going on now
another thing when you’re dealing with
building owners offices you’re leasing
out of sometimes if the company you’re
working with that owns and manages the
building is public you’re cutthroat they
are cutthroat Douglas Emmet cutthroat
there is no wiggle room you don’t matter
as customer service as much because to
them its shareholders cutthroat so
especially when they need to do a lease
right before recorder they’re now
letting you go because it goes on the
lost statement and they don’t want to
show that as hey we have to let this
lease go there is no listen I’m going
through challenging times my family I’m
Roger Moore kumuk zero if they’re public
if they’re private they’ll typically
understand you a little bit more so in
this scenario I prefer going into
building spaces that is privately held
not publicly held and you’ll understand
that as you research just a little bit
more and you go from an experience
you’ll get you’ll get a better idea what
I mean by this okay let me care what
recently happened with an office space
I’m dealing with today on how creating
creative these things can be so we
currently have outgrown this office
space it’s pretty obvious everyone’s
climbing on top of each other we can’t
fit in this place anymore and when we
got this lease 15 months ago 14 months
ago at about timeline 14 months when we
moved here from Dallas we needed an
office space
çb Richard Ellis came help beside they
did a great job classy people
on what they did we like them at least
the people that were working with us we
like them and it all worked out very
well beautiful building I think this
place is 98% it’s one of the most
desirable buildings in Dallas Morgan
Stanley’s in here it’s all the hedge
fund managers the money matters and a
type a right off the freeway great
location Galleria it’s exactly where you
want your office space to be okay but
we’ve outgrown it and if I wanted to
take an office space within here it has
to be completely on the opposite side
it’s pretty technical so we found out we
want to looked at a couple buildings to
buy and some of the buildings we wanted
to buy right now it’s kind of over
market price because Texas real estate
is doing well so everything is a little
bit higher and no one’s really renting
selling anything right now because
everybody’s keeping because there’s all
these companies are moving in so you’re
paying 30% more than you would buy you
would typically pay to buy a building so
we said no we’re not going to buy a
building right now we were almost closed
when I almost made an offer to this one
building 40,000 square-foot building but
we said no we’ll pass on this so all of
a sudden we found out about this other
office space it’s a massive office space
it’s pretty much an entire floor
somewhere around 20-some thousand square
feet and we go in and their motivation
and our motivation is a different
motivation their motivation is they
moved to Arizona okay they don’t need as
much space here anymore
and they just need a smaller office
space okay we need a bigger office space
so we went in and we struck up a deal
the entire places beautiful place
incredibly taking care of training
facility offices kitchen it’s just a
ridiculous place how its set up you’ll
see it here when we do it so the way
what happened is there was a commercial
real estate agent representing me a
broker representing me that I hadn’t yet
signed a commitment with them I met with
them he didn’t know a lot about
commercial real estate sweetheart great
man Christian guy but he didn’t know a
lot about commercial real estate I was
asking him questions I said how long you
been doing this for so he came from a
different real estate side and he’s
trying to do commercial real estate and
he sent me an email saying I don’t think
you need us at this time we didn’t use a
broker so the whole money is being made
by the building owners broker long story
short long story short
the tenants currently that wants to
lease me to space his broker that he and
I spoke he I just didn’t like this guy
the way he approached them approached us
I said look I can’t deal with you and I
said we’re not doing the deal I have no
interest of doing doing the deal you
started giving me the whole thing
everybody wants to Sophos space it’s the
best thing in town and all these other
things
I said you’re overpriced you have no
idea what you’re talking you said I said
educate your client educate your client
you are doing a disservice for not
educating your client tell them what’s
going on the marketplace
what is the sublease rate right on the
marketplace what are you doing right
down with this office they tell them no
you don’t know we’re going to get this
thing least in the next couple weeks
it’s a beautiful building I said really
then why did you had in a market for six
months and this person is losing 40-some
thousand dollars a month and you have in
the marketplace whatever the number is
usually you have an emergency please no
we’re going to keep it that’s a great I
set them aside so one day I’m going home
I said you know what I’m gonna go meet
with the CEO directly that’s what I’m
going to do today so I I talked to Tom I
said guys I wanna go meet with the CEO
and I said let me just call him first
before I go visit him I texted my said
hey found out his number I tell you my
nephew and I talked I call his home
office 800 number finally got to the CEO
and I said I want to speak with this
Geneseo very nice guy and I said hey
this is Patrick Patrick bit David I want
to rent out your space do you mind if
you and I deal together
I don’t want to speak to your commercial
real estate agent or do you sign the
contract which means you have to pay in
the commission but I think you and I
need to deal direct because I don’t have
a real estate agent represent me right
now you okay with that yes I want to do
the whole scenario everything I did the
math form this is what I need this is
what I’m willing to pay if you don’t do
this I already have another place I can
go to that I can build it out exactly
how I want I went through every single
thing with me this is my situation this
is where I’m at this is what I’m
offering you I want you to spend the
entire weekend thinking about it but
here’s one caveat he says what’s that I
don’t want you to call you commercial
real estate agent he says what are you
going to do I said I want you to call
other commercial real estate agents in a
marketplace and I want you to act as if
you’re me trying to lease your space
give them all the details that
you know about your office space and you
ask that commercial real estate agent
that’s not emotionally involved or
money-wise involved ask them is it a
fair deal that this guy is given me I
said act like that he said that’s a
great idea I said they’d call me Monday
and you tell me if you really give him
you a good offer took the weekend I get
a text on Monday we get on a phone I
said what happened he says you were
right
I said cool you want to meet up yes we
sat down I one met with him and see if
it’s a very very big company me him is
cf all these guys were sitting there
just me by myself no real estate agent
they’re all there together and we
negotiate something I said this is what
I’m looking for now here’s how one
negotiates is what’s that I say you need
office space right said yes I said why
don’t you take my existing let me take
yours and I need this to be done to this
office space and I need this this
business debt and we’ll make it work but
you come and take ours office like that
creative that was I have to leave here
but I still have a year and a half on
this he took over my office space I got
to get exactly what I wanted and what we
needed and he got exactly what he needed
because he doesn’t mean 20,000 square
feet he only needs a smaller office
space for himself that arrangement was
made why am I telling you this story the
reason why I’m telling you this story is
because sometimes you got to know who
the broker is and how brokers view you
got to know that part number two
sometimes it helps to deal with the CEO
directly now some people might say well
you can’t do that all this other stuff
you cannot do it but CEOs talk to seals
all the time I would rather sit with
this you don’t say hey you know math yes
I know math as well let’s go through it
if we don’t have a deal I don’t want
these middlemen to go back and forth can
you and I do the deal together great so
we did that part it worked out for
everybody in a last but not least the
reason why I’m telling you this story is
to know that never let a deal just say
oh it’s not going to work out get as
creative as possible offer as many
different solutions as possible and see
where it leads to that’s a beautiful
thing about commercial real estate no to
leases ever will be identical with
everything there’s always something
that’s different about a lease versus
another lease so having said that I’ve
got a few questions about people telling
me about office signing in office lease
and how do you do it how do you not do
what mistakes I have a lot more stories
but I’m not going to covered here with
I wanted to give you as much as you need
in this condense time Paul what’s our
time right now well we have 23 minutes
23 minutes I wanted to make sure you
knew enough so when you went out there
you’re educated somebody can’t bully you
and take more money from you and you can
get exactly what you’re looking for if
you go out there and solve for X and
with that being said I got my pillow
here last we did a pillow out of out of
there with the Cosmopolitan Hotel what
hotel we had Caesars Palace Hotel today
we get the legit legit pillow from our
friend Jennifer Mack I haven’t mentioned
your name for a while hey channels I
think right now 258 thousand subs
channels are 250,000 subs right now our
goal is to get 2 million by the end the
day I love the contest that’s announced
already a lot of you guys have posted
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contest with 10 of you guys from all
over the world will come and spend a day
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business plan if you haven’t yet
participated in that what are they
typing can we put an image of it here
can we what is it called I am an
entrepreneur contest if you type and I’m
an entrepreneur contest you’ll see a
bunch of videos and one of you if you
win the prize I come to you and I study
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direction on what to do and I coach you
once a quarter you don’t pay anything
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I can’t wait to hear all these different
office lease stories that you may have
down here and any questions thoughts you
may have comment on the bottom as well
take everybody [Music]
old you’re living with your mommy and
your daddy and every time you wanted to
do something your mom and dad would say
we pay the rent here you do what we tell
you to do well when they turn 18 and you
get your own apartment complex you live
in your own place privacy all this stuff
it feels good doesn’t it the same goes
with you as an entrepreneur when you
finally go and sign your own lease and
you feel free because this is your
business this is your place of operation
you get to do what you want to do with
your business now prior to doing that my
goal today with this video is to make
sure you are as equipped and educated
about signing the lease because I think
after watching this there’s not really a
book you can read about leases and other
because it would never sell that many
copies but in this video my goal is for
you to know exactly eight through Z what
you need to know as a tenant with the
brokers motivation the landlord’s
motivation everyone’s motivation so when
you go into it you’re educated you don’t
get ripped off you get the best deal and
get the best possible thing for yourself
so today’s video is directed to three
different types of people one you don’t
yet know if you’re going to have an
office one that you’re an entrepreneur
you just want to get educated about
office leases great – you’re about to
send your first office lease and you
don’t know what you’re doing or three
you already have your own office lease
but you want to know if you did it right
or wrong so the next time you don’t make
the same mistake so I want to know
everything I talked about in this video
is from many mistakes I’ve made and many
leases up signs I’ve signed millions and
millions and millions of dollars of
leases over my career and I started off
small and build it to what it is today
so let’s get right into a few things you
got to keep in mind as you’re about to
sign and office lease first things first
let’s solve for x1 how much space do you
need realistically how much space do you
need and when you think about how much
space do you need not how much space do
you need today because if you can assign
a 36 month lease
it’s almost asking yourself how much
space do you need twelve to eighteen
months from now because you need a
little bit of room for you to outgrow
your office but you don’t want it to be
way too big you don’t want it to be way
too small you need to plan for 12 to 18
months number two location what do you
want it to be does it have to be near a
freeway does it
if it’s in your freeway do you want it
to be in a place where all the traffic
comes in do you want it to be in a
shopping center where it’s right by the
mall do you want it to be in a mall what
do you want it to be where is it
suitable for you as a location through
the affordability what can you afford
what is the number that you can afford
right now and the way to calculate this
is how much money do you have set aside
so if your expenses are going to be
$4,000 a month and you take your
personal expenses whatever it’s going to
be do you have that saved up for six to
twelve months because they can ask you
for a first month last month sometimes
they ask you first second and last month
it depends on if you have experiences
how you negotiate and keep this part
amount anything when it comes on to
commercial real estate it’s all
negotiable all of it there’s so many
creative ways to do it no two deals in
commercial real estate are ever the same
number four turn 12 months 24 months 36
months what is your terms five is
traffic do you need parking so meaning
is there going to be a lot of employees
I going to be parking their car do you
want it to be the type of parking where
it’s dollar 20 per hour that people come
in and the gate goes up do you need
security what is it that you’re looking
for would parking for traffic meaning is
it a place that a lot of customers are
going to come in if it is then you need
a nice office space if it’s not who
cares if they’re not going to see it
because it’s a call center there’s not
really going to be any in you know
customers that are going to come and buy
from you so you need to know that
because it’s a big difference on price
point they get to save and I last but
not least legal you always want to
whatever you do whatever deal you get
even if your commercial real estate
agent your broker says I’m gonna have my
legal look at it I always recommend you
spend two to four hundred dollars to
another attorney that’s not emotionally
attached to him because to them their
attorney is going to look at the deals
that benefits you but still at the same
time it’s the deal that’s happening here
with the broker get an on interested
attorney to look at the entire deal
before you do anything so a couple basic
things about office space you got
basically three different types of
office spaces you’re going to get if
you’re running a commercial office space
type a Type B type so you keep hearing
about this so people ask what is typing
what is type of type C type a is newest
building it was built in 2009 in the
most traffic place community its type a
Type B maybe some
little older but it’s in a decent
community so what’s built on 1981 but
it’s in a decent community could be type
II still presentable spoke clients can
come install customers can come in but
it’s not the sexiest then there’s type C
type C is oldest worst location not a
desirable place it’s type C by the way
I’ve had a type C type B and a type A
office I know all of them and I know
exactly what the benefits pros/cons
pricing wise it is to go in each one of
these things so you need to know about
that now let’s talk about rent a lot of
times you’ll hear this language about
single net double meant triple net
full-service schools Pat what does this
really mean when the commercial real
estate agent starts talking about this
I’m kind of confused so a couple of
things to keep in mind you rarely will
see single net being done this is when
the landlord pays the entire rent this
is when landlord pays the entire rent of
entire expenses so for instance if you
have taxes insurance and maintenance
they’re covering all that you’re not
paying any of that it’s all on them
they’re saying we’re willing to take
single net you’re not going to find that
a lot maybe in another country you live
in
you’re not going to find out a lot in
America double net is where you’re only
paying taxes and insurance triple net is
you’re paying taxes insurance and
maintenance and an obviously
full-service gross you’re paying one
check it covers everything full-service
gross kind of works out that way as well
so I’ve done all of them myself
typically commercials going to be double
or triple net that is very common to be
hearing debt so now credit wise credit
wise my first office lease I sign I’ll
never forget this I was in an office
that I was renting from other people and
this place was horrible for me because I
couldn’t grow I had no control it was
driving me insane and I had no authority
to say anything about the office that I
had so I want to do this no it’s not
your office I want to do that now kind
of like the whole thing with living with
mommy and daddy we should have all the
right to do that so one day I made a
decision I’m saving money I saved my
money one night I’m talking to one of my
agents guy named Oscar if he sees the
field remember this I said Oscar I want
you to put me in front of somebody he
says I don’t think this is for me I’m
having a hard time with sales and this
is that he wanted to go become an agent
for sports athletes which eventually he
did he became an agent for famous soccer
players he said I’m just not good in
sales and I don’t know if I came that’s
it introduced me to one person
before you say this isn’t for you so
that night we get in this Volkswagen we
go to Granada Hills I go to this type-c
office building and we go into this
place and the guy we meet is a guy named
Shane and I walk in the entire places
dark this is Oh 708 mortgage crisis has
already taking place this guy was
killing it he no longer is and I go to
his office we end up doing all this
investment saving insurance all this
other stuff and at the same time I said
what’s going on with this office this
man I can’t do anything with this office
I said what’s your plans with the subs
I’m trying to lease this out to somebody
I knew my credit was bad credit so I
knew a building is not going to give me
a direct lease so I have bad credit
I need a sublet we started talking he
and I I remember vividly what price
point I got what I paid for it how it
worked out so I got the lease away from
him I paid for the rent I paid for the
lecture I paid everything he ended up
getting a good deal because I don’t know
what I was doing at that time released
but I ended up getting a good deal
because I didn’t have a whole five year
lease that I sign I got a shorter sign
and it worked out for me because I don’t
have good credit so allowed me a way to
build credit with a building and start
moving myself up in business and all
this other stuff so that worked out for
me stay there crew incredibly well until
eventually we got evicted out of that
office because we grew extremely too
fast and then I have to go and get my
next office space but let me get into
the next point I want to make you here
so motivation motivation this is very
important for you to know what is your
motivation
what is Brokers motivation what is the
building owners motivation extremely
important you understand this part and
what relationship you play I coach
entrepreneurs all the time about this
here okay so hear me out first of all
what is your motivation your motivation
is to get exactly the amount of space
you’re looking for with exactly the
floor plan you know the way you want it
to be done which means Ti you’ll hear
this terminology t.i that means tenant
improvement you want them to set up the
office in the way that you want it to be
set up without extending the lease too
far okay so you want it to be three
years with p.i with office setup the way
it is with
lowest amount of expenses your pain and
that’s your motivation as a as a person
that’s getting an office space now let
me take the broker brokers go with you
some of the brokers are going to watch
this we had who was these brokers that
showed up the other day real nice guys
rep for brokers came they said value
Tama followers if they’re in our
building they showed up out of nowhere
for classy guys and I’m talking brokers
can be watching this right now and I
highly recommend you guys share this
with other commercial real estate agents
brokers Commission works this way the
longer the lease the bigger the space
the higher dollar per square feet the
bigger their pay they let me simplify
the math for you let’s just say you
speak the space you get it’s three
thousand dollars a month and you sign a
36 month lease 3,000 times 36 is 108
thousand dollars the Commission
typically is 6% 6% on the 108 is 6000
480 let me tell you how the six thousand
480 gets split and who pays for it
half of it goes to your real estate
agent that you don’t pay for the
building owner pays for the other half
goes to the broker that represents the
building owner so one your broker gets
half of this and the building owners
broker gets the other half so 3200 goes
to your broker 3200 gets to the building
owners broker you don’t pay for it they
pay for it now if you’re on the complete
opposite side and your subleasing your
space to somebody else you are paying
the six thousand 480 to the two because
now you’re becoming the lease
owner not them keep that part amount now
let’s talk about the broker relationship
I’ve had many different brokers in my
career and they’re they’re pretty
interesting one personality I had let’s
call this guy how kook I would call this
guy probably the sleaziest commercial
real estate agent I’ve ever dealt with
in my life and so let me tell what
happened with this guy he came in and I
told them at the time when we signed
this lease I told them I signed this
lease that was a six-year lease I told
him I only need it for three years
because I’m moving to Dallas Texas
he knew it so he came
and he pushed and said why don’t you
take this part for three years and take
the other part for six years but what
we’re going to do is we’re going to put
a cancellation on the 36 month so we can
make this work and cancel it and then
you can go to Texas because that’s
what’s going to happen no problem so it
came to we sign everything the contract
ended up being a million and a half or
two million dollars so do the math here
on 6% okay he made I think eighty four
thousand dollars or some number like
that I was paid out he made a lot of
money the guy that was working the least
that time with him later on came back
and said everybody hates working with
this guy everyone left that guy even
left him because the way he handled the
whole thing now watch what happened
experience with this broker he did it
with his own commercial real estate
company so he called himself john doe’s
look how cooks realty let’s just say
hypothetically that’s the name of the
company okay so he called this company
the name he was the only employee when
it came down to the three years that I
had to leave to Texas he wouldn’t answer
my phones he wouldn’t call me and he
told me he had a heart attack so then I
went to the lanthorn I said wait a
minute this guy told me had a heart
attack and another guy named Tony told
me what he talked money he never had a
heart attack
he was just shown a property this week
so then he says I can’t help because my
wife told me not to help you this guy
disappears obviously a crook and the
whole story one telling you this in
business is you’re going to face guys
like this and I call them the way it is
I kind of been never forget I call them
the waiters with how this guy handled
the entire deal this is the point I’m
making to you my suggestion don’t get a
broker that is not tied to bigger
company I would much rather hire
somebody that’s tied to CB Richard Ellis
that’s a very big company and know that
if my real estate agent ends up quitting
in the industry I can always go to CB
Richard Ellis and saying I need your
help for your attorneys to look at this
and help me bail me out out of this
because this guy was a nobody and a
one-man shop I got stuck with this lease
okay so I ended up painted the whole
million and a half you know two million
dollar lease whatever was we’re good to
go because we’re going to hold our
commitment but that’s the broker side
now let me give you another guy name
another guy name I had guy named Jared
absolute stud
he made one mistake he took one lease of
mine that he said he knows the glendale
market very well he didn’t so you need
to know whoever your broker becomes what
city their experiences listen brokers
are salespeople they’ll tell you they
know everything about every market they
do not everybody has a specialty so ask
him what is your special to what market
what city what zip code let them tell
you if they tell you everywhere don’t
believe it it’s a lie
ask him give me specific zip codes that
you work very well so find commercial
real estate agents that are dominant in
the specific zip code that you are
trying to get an office space or lease
your office space to somebody else so I
like Jared he was a hustler he worked
hard he answered he was all good he just
took one badly so I gave him a lot of
leases I think he’s done four or five
six seven eight ten leases with us good
guy now let me give you another relation
about brokers you got to know about so
just so you know the building owners
broker and your broker I know this is
going to sound strange and the
commercial real estate agents are going
to think of me I’m crazy when I’m saying
this they’re on the same damn team
they’re on the same team
do you know why what do you think they
both want to happen to close the deal
and how big of a list you want both do
you think both didn’t want it to happen
as big of a lease as possible square
footage-wise as high of a number as
possible as a longer term as possible
makes both of them more commissions so
the only people that are on the same
team are the building owners broker and
your broker I know this is very weird
but that’s exactly how it is even if
that broker tells you that’s not right
that’s exactly how it is okay so the way
they talk to each other they go like
this they go and say hey what do you
think this is a bad nuts that all this
stuff that you use the negotiation
language what is this loan well you know
him voice yeah we’re duty like this
makes obviously like the space so what
are we going to do they go talk they
strike up a deal then you sign the lease
let me tell what I’ve got them to do and
then they come and talk to you okay just
know these two brokers are on the same
team you got unsend that part nothing
wrong with that but don’t be naive and
thinking your own broker is fully on
your side they want a longer lease to
make more money on it so now let’s go
into the building owner building owners
trying to keep this property because
they’re building equity every year
somebody else is paying to rent
them to the building they own they’re
building more equity long-term they’re
building a bigger portfolio the more
income comes in to more properties they
can leverage the more assets they can
leverage
they’re simply running the capitalistic
system they’re doing their part they
have no involvement
except for leasing making sure 100
percent of the office space is being
rented out so an office space that’s
above 90 percent they don’t need you
that bad in office space that’s less
than 70 percent they need you
tremendously so it’s always good to ask
what percentage of this office is
occupied already they’ll say I will run
70 percent so on your side over at 92
percent it’s on their side so if you
really want to be in that building
you’re going to pay premium note that
position and occupancy what is the
occupancy rate in the office right now
in this building right now they’ll tell
you so I’ve worked the leg directly with
building up building owners I’ve worked
with bigger building owners where I only
dealt with the broker but regardless you
kind of want to know what’s going on now
another thing when you’re dealing with
building owners offices you’re leasing
out of sometimes if the company you’re
working with that owns and manages the
building is public you’re cutthroat they
are cutthroat Douglas Emmet cutthroat
there is no wiggle room you don’t matter
as customer service as much because to
them its shareholders cutthroat so
especially when they need to do a lease
right before recorder they’re now
letting you go because it goes on the
lost statement and they don’t want to
show that as hey we have to let this
lease go there is no listen I’m going
through challenging times my family I’m
Roger Moore kumuk zero if they’re public
if they’re private they’ll typically
understand you a little bit more so in
this scenario I prefer going into
building spaces that is privately held
not publicly held and you’ll understand
that as you research just a little bit
more and you go from an experience
you’ll get you’ll get a better idea what
I mean by this okay let me care what
recently happened with an office space
I’m dealing with today on how creating
creative these things can be so we
currently have outgrown this office
space it’s pretty obvious everyone’s
climbing on top of each other we can’t
fit in this place anymore and when we
got this lease 15 months ago 14 months
ago at about timeline 14 months when we
moved here from Dallas we needed an
office space
çb Richard Ellis came help beside they
did a great job classy people
on what they did we like them at least
the people that were working with us we
like them and it all worked out very
well beautiful building I think this
place is 98% it’s one of the most
desirable buildings in Dallas Morgan
Stanley’s in here it’s all the hedge
fund managers the money matters and a
type a right off the freeway great
location Galleria it’s exactly where you
want your office space to be okay but
we’ve outgrown it and if I wanted to
take an office space within here it has
to be completely on the opposite side
it’s pretty technical so we found out we
want to looked at a couple buildings to
buy and some of the buildings we wanted
to buy right now it’s kind of over
market price because Texas real estate
is doing well so everything is a little
bit higher and no one’s really renting
selling anything right now because
everybody’s keeping because there’s all
these companies are moving in so you’re
paying 30% more than you would buy you
would typically pay to buy a building so
we said no we’re not going to buy a
building right now we were almost closed
when I almost made an offer to this one
building 40,000 square-foot building but
we said no we’ll pass on this so all of
a sudden we found out about this other
office space it’s a massive office space
it’s pretty much an entire floor
somewhere around 20-some thousand square
feet and we go in and their motivation
and our motivation is a different
motivation their motivation is they
moved to Arizona okay they don’t need as
much space here anymore
and they just need a smaller office
space okay we need a bigger office space
so we went in and we struck up a deal
the entire places beautiful place
incredibly taking care of training
facility offices kitchen it’s just a
ridiculous place how its set up you’ll
see it here when we do it so the way
what happened is there was a commercial
real estate agent representing me a
broker representing me that I hadn’t yet
signed a commitment with them I met with
them he didn’t know a lot about
commercial real estate sweetheart great
man Christian guy but he didn’t know a
lot about commercial real estate I was
asking him questions I said how long you
been doing this for so he came from a
different real estate side and he’s
trying to do commercial real estate and
he sent me an email saying I don’t think
you need us at this time we didn’t use a
broker so the whole money is being made
by the building owners broker long story
short long story short
the tenants currently that wants to
lease me to space his broker that he and
I spoke he I just didn’t like this guy
the way he approached them approached us
I said look I can’t deal with you and I
said we’re not doing the deal I have no
interest of doing doing the deal you
started giving me the whole thing
everybody wants to Sophos space it’s the
best thing in town and all these other
things
I said you’re overpriced you have no
idea what you’re talking you said I said
educate your client educate your client
you are doing a disservice for not
educating your client tell them what’s
going on the marketplace
what is the sublease rate right on the
marketplace what are you doing right
down with this office they tell them no
you don’t know we’re going to get this
thing least in the next couple weeks
it’s a beautiful building I said really
then why did you had in a market for six
months and this person is losing 40-some
thousand dollars a month and you have in
the marketplace whatever the number is
usually you have an emergency please no
we’re going to keep it that’s a great I
set them aside so one day I’m going home
I said you know what I’m gonna go meet
with the CEO directly that’s what I’m
going to do today so I I talked to Tom I
said guys I wanna go meet with the CEO
and I said let me just call him first
before I go visit him I texted my said
hey found out his number I tell you my
nephew and I talked I call his home
office 800 number finally got to the CEO
and I said I want to speak with this
Geneseo very nice guy and I said hey
this is Patrick Patrick bit David I want
to rent out your space do you mind if
you and I deal together
I don’t want to speak to your commercial
real estate agent or do you sign the
contract which means you have to pay in
the commission but I think you and I
need to deal direct because I don’t have
a real estate agent represent me right
now you okay with that yes I want to do
the whole scenario everything I did the
math form this is what I need this is
what I’m willing to pay if you don’t do
this I already have another place I can
go to that I can build it out exactly
how I want I went through every single
thing with me this is my situation this
is where I’m at this is what I’m
offering you I want you to spend the
entire weekend thinking about it but
here’s one caveat he says what’s that I
don’t want you to call you commercial
real estate agent he says what are you
going to do I said I want you to call
other commercial real estate agents in a
marketplace and I want you to act as if
you’re me trying to lease your space
give them all the details that
you know about your office space and you
ask that commercial real estate agent
that’s not emotionally involved or
money-wise involved ask them is it a
fair deal that this guy is given me I
said act like that he said that’s a
great idea I said they’d call me Monday
and you tell me if you really give him
you a good offer took the weekend I get
a text on Monday we get on a phone I
said what happened he says you were
right
I said cool you want to meet up yes we
sat down I one met with him and see if
it’s a very very big company me him is
cf all these guys were sitting there
just me by myself no real estate agent
they’re all there together and we
negotiate something I said this is what
I’m looking for now here’s how one
negotiates is what’s that I say you need
office space right said yes I said why
don’t you take my existing let me take
yours and I need this to be done to this
office space and I need this this
business debt and we’ll make it work but
you come and take ours office like that
creative that was I have to leave here
but I still have a year and a half on
this he took over my office space I got
to get exactly what I wanted and what we
needed and he got exactly what he needed
because he doesn’t mean 20,000 square
feet he only needs a smaller office
space for himself that arrangement was
made why am I telling you this story the
reason why I’m telling you this story is
because sometimes you got to know who
the broker is and how brokers view you
got to know that part number two
sometimes it helps to deal with the CEO
directly now some people might say well
you can’t do that all this other stuff
you cannot do it but CEOs talk to seals
all the time I would rather sit with
this you don’t say hey you know math yes
I know math as well let’s go through it
if we don’t have a deal I don’t want
these middlemen to go back and forth can
you and I do the deal together great so
we did that part it worked out for
everybody in a last but not least the
reason why I’m telling you this story is
to know that never let a deal just say
oh it’s not going to work out get as
creative as possible offer as many
different solutions as possible and see
where it leads to that’s a beautiful
thing about commercial real estate no to
leases ever will be identical with
everything there’s always something
that’s different about a lease versus
another lease so having said that I’ve
got a few questions about people telling
me about office signing in office lease
and how do you do it how do you not do
what mistakes I have a lot more stories
but I’m not going to covered here with
I wanted to give you as much as you need
in this condense time Paul what’s our
time right now well we have 23 minutes
23 minutes I wanted to make sure you
knew enough so when you went out there
you’re educated somebody can’t bully you
and take more money from you and you can
get exactly what you’re looking for if
you go out there and solve for X and
with that being said I got my pillow
here last we did a pillow out of out of
there with the Cosmopolitan Hotel what
hotel we had Caesars Palace Hotel today
we get the legit legit pillow from our
friend Jennifer Mack I haven’t mentioned
your name for a while hey channels I
think right now 258 thousand subs
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I can’t wait to hear all these different
office lease stories that you may have
down here and any questions thoughts you
may have comment on the bottom as well
take everybody [Music]
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