Use Multiple Resources for Leasing:
- Work with a broker to find the best location.
- Search independently using platforms like LoopNet for available leases or properties.
- Contact brokers or property owners directly for negotiations.
Hire a Real Estate Lawyer:- Ensure a good contract lawyer reviews all documents and terms.
- Lawyers can catch hidden clauses like landlords demanding a percentage of profits.
Review All Lease Iterations:- Landlords may insert changes in later versions, so review every update carefully.
- Key changes could include unexpected terms that affect profitability.
Understand Tenant Improvement (TI):- TI allowances are meant to cover build-out costs, but often fall short.
- For example, a TI might offer $20 per square foot, but the real cost could be $50-$60 per square foot.
- Anything beyond the TI is the tenant’s financial responsibility.
Learn from Experience:- A personal story shared: A clinic had a $150,000 TI but the total build-out ended up costing $300,000, leaving $150,000 for the clinic to cover.
Consider Second-Generation Space:- Rent or buy second-gen spaces, such as failed clinics or dental offices that already have a build-out.
- These spaces require fewer renovations and are more cost-effective.
Negotiate Lease Terms:- Aim for shorter-term leases (3-5 years) to ensure flexibility for growth or relocation.
- Ensure the lease includes a break clause in case the business needs to move or close.
- A clause that allows for lease termination with a penalty is crucial.
Avoid Personal Guarantees:- Negotiate to avoid personal guarantees on properties.
- Use your business as the signing entity so that in case of bankruptcy or relocation, you’re not personally liable for the lease.
Key Takeaway:- Always hire professionals, like a contract lawyer, to review lease agreements and ensure there are no hidden surprises.
