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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 b 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 your video for the quarter million contest with 10 of you guys from all over the world will come and spend a day with me for me to go through your 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 your entire business and give you direction on what to do and I coach you once a quarter you don't pay anything for it I'm simply coming to you to help you grow your business but how much was only one person so if you haven't subscribed yet be sure to subscribe click the button here to subscribe and click on notifications you'll see that little earth button click on that to be part of the notification squad you'll be part of the first group of people that get these videos that go out to you man 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