Is getting the cheapest rate the most desirable outcome for practice owners, or is there something else you should be looking at when evaluating your lease contract? In this episode of Finding MOB, we’re going to show you five reasons you want to know what’s in your lease contract so you don’t end up in a world of regret. We’ll look at the nuances of commercial healthcare real estate so you know exactly what to look for in a lease.
Ask The Right Questions
What else in the lease process should you be looking at when evaluating your lease contract? The reason this is important is that commercial real estate has more nuances than other real estate transactions. When you add in the healthcare aspect, it becomes a totally different world—and most commercial real estate agents don’t know how to handle that.
As a healthcare professional, these are some things you need to think about: What on earth is a modified gross lease, a full-service lease, or even a triple net lease? What exactly are the budget implications for me? What are the current market terms for this property? Are there any restrictions at this property, or am I wasting my time? What condition is the property and how soon can I occupy the space?
Working With An Agent
Now that we know why this is important, I want to share with you how to diagnose the situation so you can make a more educated decision. First and foremost, hire an agent. It doesn’t have to be me, but hire someone that is a strong advocate and knows what they’re doing. Remember, all landlords are different; they may offer you the cheapest rate, but it could be a nightmare.
If you have fixes or issues that need to happen quickly, you should get to know the business terms in the deal and be able to add up the value. A good real estate broker knows your budget and knows how to get to the best deal possible.
Finding The Right Property
A huge component of looking for a property is finding one that accepts your medical use. Just because a property may seem available, other factors may make it unavailable for you. Another aspect of the deal is the condition of the property and how long it’s going to take to build out your practice.
When it comes to tenant improvement allowance, you’re going to want to look at the market and the initial condition of the space. To put this in context, I want to share some examples of what I laid out so far. First, if you’ve seen an abnormally cheap rent, it’s worth investigating.
It may have something to do with the area, the property, or a landlord that’s tough to deal with. We recently had an issue like this come up, and that removed that property from consideration.
The Best Terms
Next, the terms in a deal matter. These often confuse clients and even a lot of brokers as it’s not always clear what the rent and expenses are. If expenses are included in the rent, it may look like the rent is above market even though it’s really not. Once we break down what’s included in the market rent, the client felt comfortable moving forward with the lease.
You may find the perfect location for your business, but what happens when there are restrictions on your medical use? We recently had a mental health clinic expanding their business and the landlord was hesitant. We were able to discuss the clinic and what they did, which made the landlord more comfortable with their use.
Negotiating Your Lease
All of these examples should show you how important the holistic process is of moving into your space and negotiating your lease. The market is constantly changing, and you need a professional to navigate that for you. It’s wise to look at other factors beyond a cheap market rent in your next healthcare real estate move.
If you want to discuss your new lease or expansion plans, feel free to contact me and I’ll be happy to help. Our firm has done more than 1,000 deals in over 30 years, and we’ve learned a thing or two about negotiating and getting the best deal for our clients. As you can imagine, your situation is unique, and we take all of that into consideration as authorities in healthcare real estate transactions.
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