Secure Dental-Colin Carr: Audio automatically transcribed by Sonix

Secure Dental-Colin Carr: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Dr. Noel Liu:
Welcome to the Secure Dental Podcast. Through conversations with the brightest minds in the dental and business communities, we'll share practical tips you can use to scale your practice and create financial freedom for yourself and your family. My name is Dr. Noel Liu, CEO and Dentist at Secure Dental, and also co-founder of DentVia. I'm your host for the Secure Dental podcast, and I'm so glad you're joining in.

Dr. Noel Liu:
Hey, hey, welcome again to our Secure Dental podcast. This is another episode where we bring in many great talents from both inside and outside our dental profession. And today, we have a really, really great treat here. So before we get started, big shout out to my sponsor, DentVia. DentVia is a virtual dental administration company that assists our front desk and our office managers with back-end tasks such as calling leads, insurance verification, and all the back-end stuff, which we all hate. Definitely visit them at DentVia.com. That's www. D E N T Via.com. Now, without further ado, I'm going to jump right in. I got Colin Carr. He's the founder and CEO of Carr, a nationwide leader in healthcare real estate. Colin knows doctors inside out. He knows healthcare, and he helps us get the real estate as well as lease spaces to better serve our needs. Now, without giving out any further information, I'm going to pass the mic off to you, Colin, and I want you to do the intro and take it from there, man. All yours.

Colin Carr:
Thanks for having me. I really appreciate it. So, I've been doing commercial real estate for over two decades now. I started in real estate when I was 19. I got out of high school and was not sure what I wanted to do, but I knew I was fascinated with real estate and a few other things, so I jumped right in.

Dr. Noel Liu:
Did you say 19?

Colin Carr:
Yep, yep. So, I started managing apartment complexes and doing a lot of property management. And then, I got into brokerage, like helping people lease and purchase when I was 22. And the first company I worked for was basically a tenant-buyer firm, mostly for like large retailers. So we did Walmart, Wendy's, fast food like Wells Fargo, Blockbuster. We had a coffee franchise that competed with Starbucks, so it was stuff like that. I did that for a couple of years, enjoyed it, but I started just by default. I started working with a lot more business owners. I started doing office and industrial tenants, and then I found myself involved in a handful of medical and healthcare deals, and I had a couple clients that I'd worked for that owned industrial buildings, that purchased some medical buildings, and so I got thrust into the medical space just by default. And I realized that I really liked working with healthcare providers. And so I started doing more and more healthcare, more and more medical, and I got to eventually to the place where I was doing almost exclusively healthcare. And I had a series of deals that happened sequentially where, I knew this is how the game was played. I had lived it, I had done it. But just for me, I had this epiphany like, hey, we need to adjust the business model and shift how we're doing things differently. And so I'll give the quick little story about, you know, I had a couple of medical buildings that I was listing. I actually had quite a few, but I had these specific ones that I was listing for this landlord, and we had a couple doctors who had leases coming up for renewal. So they'd been in the property for a long time. They had thriving practices, and I was talking to the landlord, who was a large publicly traded REIT that owned the real estate, and the asset manager called me one day, and he said, hey, let's talk about Doctor So-and-so's lease. It's coming up for renewal. And he said, have you met with the doctor? And I said, yeah, I met with them last week. And he said, does he have a broker? And I said, no, he's doing it by himself. Then he asked me, does he know the market? And I said, you know, he thinks he does, but he doesn't know the market even close to what he should. And then he asked me, do you think he's willing to move? And I said, I know he's not willing to move because he told me that he shouldn't have told me that, but he told me that. He told me he didn't want to move and he couldn't move. And so he was already paying like $4 or $5 a square foot above what we were asking for new tenants at the property. Like, if this guy would have just gone on our website and looked at the marketing materials, he would have seen we're marketing spaces that are vacant in the building, like $4 or $5 a foot below what he was paying. And the landlord says to me, go back to him at a lease rate. That was another like $4 or $5 above what he was currently paying. And so I'm like, well, that's going to put him like literally $11 a square foot above market, like $400,000 or $500,000 in excess rent from what he's going to pay over the next 7 to 10 years than if he was at a competitive lease rate if he knew what he was doing. And the landlord just said to me, he goes, get it done, or I'll find someone who will. And I got it done, got the lease done. And the interesting thing is the doctor didn't even know he was overpaying. Like it wasn't like he was kicking and screaming and yelling and sending, you know, bad emails that people and he didn't even know, he literally just signed off on the lease and went back to his business. And so I had a couple of those scenarios where I just watched landlords just completely manhandle these doctors. And the landlords were professional negotiators, professional investors, and then they were hiring me as a professional negotiator. And then the group of us is going up against these doctors that are incredibly intelligent. Like, you can't become a dentist or a physician if you're not intelligent. But they had no idea how to play the commercial real estate game, and it is truly a game. So, after a number of those deals, I just realized it is a fair fight. Both sides are ready, willing and able. No one forced the doctors to lease a space or to sign a lease. But I just realized that these guys need our help. So 2009, I launched our company, which is called CARR, and the idea was we would do only healthcare, and we would do only tenant and buyer rep. So we'd always be advocating on behalf of the doctor that the practice and we would eliminate conflicts of interest. We wouldn't have one person pretending like they're working for one party, but they actually have a fiduciary with the other. We just draw a clean line of separation where only on the doctor's side. We're going to protect their interests, level the playing field, help save them a couple hundred thousand dollars per deal, if not more, save a ton of time, and we launched it in '09. And today, we're now licensed in all 50 states. We have over 5000 clients that we're doing. I think actually we have over 5500 clients that we're actively doing work for right now where we're helping them renegotiate a lease, buy a property, start a practice, what have you. And our whole focus is just protecting the doctor's interests and helping them to maximize their practices' profitability by getting the best possible terms.

Dr. Noel Liu:
So you've seen both sides. I mean, you know, that's a big, big, huge plus because you were working for the other side before. So you know exactly how these guys are going to be treating, you know, us professionals. And then now you're working on this side. So, what do you think has changed? Like, you know, from the time when you were working for them in this time. Is it like pretty much the same deal if it's a, you know, owned, like, let's say, real estate or if it's like a mom and pop owned real estate, or do you see like a difference in like how they handle their leases?

Colin Carr:
Yeah, you know, I mean, there's definitely different types of owners. You get somebody that maybe inherited a building, it's their only property, or, you know, maybe their parents own the property, and then they inherited something like that. Then you get these guys that are, you know, maybe they own a building or two, or maybe somebody bought a property for their own business, and they're leasing it out to a few other tenants. So they kind of know what's going on. And then you get into this realm of like just truly professional landlords, like institutional landlords, whether it's a REIT or it's an insurance company or just a very well capitalized investment group. And so you deal with different tendencies as far as how they operate. But the one thing that's the same, no matter who you're working with, is everyone wants to make the most amount of money they can. And this is not like limited to landlords. Like no dentist wants an insurance company to reduce their reimbursements. No dentist is going to tell an insurance. No dentist is going to tell Delta Dental. Hey, listen, if you guys want to pay me 20% less next year than you pay me this year, it's not a problem. Like everyone wants the most they can get. You want to do it with integrity. You want to do it fairly, but nobody wants to have their money. Give them an average yield, you want the highest return from the stock market. You want your 401K to push out the biggest returns. And so it's a really obvious game when you think about it. But a lot of doctors approach landlords as if the landlord actually thinks that they care about them. Like, landlords will say stuff like, you've been a great tenant, we want to keep you, we'll treat you fairly. And they're saying that so the doctor puts their guard down and then signs off on a lease where they overpay by a quarter million dollars in a 5, 7, or 10-year period. So, the tactics haven't changed a whole lot. You get savvy landlords that want to make as much as they possibly can. They might even be a patient of the doctor. They might send them a Christmas basket. They might take him golfing every couple of years to try to keep that relational equity there, so to speak. But at the end of the day, these landlords, they want the highest return. They want to make their properties worth as much as they can. And that only comes through increasing lease rates, reducing how much you give in concessions. And so landlords are savvy, and they play the game well, and they are in it to make as much as they possibly can.

Dr. Noel Liu:
Great. Let's talk about this here, like renewals, lease renewals, like a lot of the misconception, is like, hey, you got this two five-year options or, you know, coming up, is that somewhere whereas a tenant we can still negotiate, or is that set in stone?

Colin Carr:
Yeah, that's a great question, truthfully, because a lot of people will get a lease renewal option, and there's two main types of options on a lease renewal. There's one option where you have predetermined lease rates for a predetermined amount of time. So you might do a ten-year lease and then have two five-year options to renew. And then, in the lease, it will say that the first five-year options would be maybe year 11 through 15. It'll start where your ten left off with a 3% increase or a 4% increase. And so year ten ends, and then it just ratchets up for the next five years and keeps going up. So a predetermined lease rate over a predetermined amount of time. The other type of lease renewal option is what we call just an option, where the landlord has to negotiate with you in good faith. So typically, I'll say things like then market rents or to be negotiated terms, that's typically a much more favorable renewal option because when you just sign off on that predetermined numbers, like on a five-year option with set lease rates, number one, you're probably above market. I mean, most leases have an annual increase, and that annual increase outpaces inflation. Now, we've had record inflation the last couple of years. But even so, typically, those leases increase at a rate each year. That outpaces where the lease rates would be if you vacated that space, what would the landlord go to market and try to release that? Typically, you're paying more than they would charge a new tenant. So we've got to get that lease rate back down to a competitive lease rate. And then, on top of that, savvy tenants don't sign off on lease renewals without getting concessions, free rent, renovation allowances. And so if you just exercise a renewal option and you're an above market lease rate and you get no free rent, no build out or renovation or tea allowance, you probably just lost $100 or $200 or $300 grand like that. Starbucks is not going to sign another 5 or 10 years and give a landlord another 5 or 10 years of guaranteed cash flow and make their life super easy. They don't even have to release the space. They just sign a document without capturing concessions. So savvy tenants need to realize every economic concession that's on the table, for a new tenant, doing a new lease is on the table for renewal. Why wouldn't it be? It's the cheapest, easiest, fastest with the least amount of risk deal a landlord could do. Why would a landlord not give you some level of concessions? Yet landlords tell tenants all the time, oh, we don't do that on renewals or.

Dr. Noel Liu:
Right, right.

Colin Carr:
Stuff like that.

Dr. Noel Liu:
But you've seen it happen, right?

Colin Carr:
... everything.

Dr. Noel Liu:
Right.

Colin Carr:
And that's the thing. When you deal with institutional landlords like the REIT that we were dealing with on that one specific renewal that I mentioned earlier, they had budgeted like they had literally several months of free rent budgeted. They had commissions for the tenant to have a broker even though they didn't. So, I got a double commission on that one as the landlord agent. They had free rent; they had a lower lease rate scheduled. And then when the tenant didn't have a broker, didn't know what he was doing, and wasn't going to move, the landlord was like, I'm not going to give this guy anything. In fact, I'm going to charge him a premium. So that deal, literally, if that doctor would have had an expert advisor helping him, he literally could have cut his rent down to $10, $11 a foot lower. He could have gotten 4 or 5 months of free rent. He could have gotten enough money to fully renovate, like flooring, paints, you know, upgrade some millwork, you know, window treatments, lights, etc., and instead, he just signed off on it.

Dr. Noel Liu:
So in a case like that, is a doctor paying you guys a commission there or is it the landlord still?

Colin Carr:
That's the beautiful part of it is commissions and commercial real estate are paid just like residential real estate typically is paid. They're paid by the landlord. And so, like in residential, anyone who's ever bought a house that's hired an agent or broker to help them, they know that the seller has a commission set aside for the deal, and they offer half to their agent, the listing agent, and then they offer half to the buyer's agent because they're trying to attract agents to bring them, buyers. Commercial real estate is the same thing. Landlords want tenants, they want to lease spaces, they want to sell spaces. So they hire brokers typically, or they do it internally. And there's almost always a commission set aside for the buyer or the tenant, in this case, the healthcare provider, to have representation. And if the healthcare provider doesn't, the landlord's agent just gets a double commission. So it's not hard to figure out why a listing agent would want to make you think they're helping you, but they're actually not. Or why the landlords would say things like, hey, if you don't use an agent, we'll give you a better deal. I mean, it's complete nonsense. Like literally what they're saying is if you don't use an agent, I'm going to save myself the money, put it in my pocket, and then I'm going to overcharge you by $200,000 but make you think you got a deal.

Dr. Noel Liu:
So and so. Let's say, if the doctor wants to renew now, right? And they want to look for some sort of representation now. So that would be the doctor's responsibility then, correct?

Colin Carr:
Correct, yeah. Because the landlord's not going to say, hey, call Colin or one of his guys because the landlord knows that we're going to hold them accountable. We're not going to disrespect them. We're not going to take advantage of them. But the landlord knows I can't pull the wool over this guy's eyes. I'm going to have to treat him fairly because Colin knows the market. He knows what other landlords and sellers are willing to do, and he's not going to allow the doctor to take a bad deal.

Dr. Noel Liu:
Love it, love it. And what happens, like, in a predetermined renewal when you're doing, like, let's say everything is figured out, is there a room for some sort of negotiation there, or is it like?

Colin Carr:
Yeah. So the best way to handle that, that's a good question to kind of bring this all together for this topic. The best way to look at it is contact an expert real estate advisor that specializes in healthcare tenant-buyer rep. Let them look at your current lease and the renewal option, and then let them do a market evaluation for you. If, for some reason, that option to renew actually is competitive for some reason, let's just say that your original lease was so competitive, and the renewal option terms are so far below market. Just because the market's gone up so much, there's a possibility of just signing that renewal option could make the most sense for you and waiving any options for free rent or TI, because the lease rates are so much lower, and the landlord would not give you that lease rate if you negotiated. But typically, you're better off to waive that option and just have your agent rep negotiate a brand-new deal. Because here's the reality. The tenant might say, well, yeah, well, I don't want to move. Here's the reality. The landlord doesn't want you to move worse than you don't want to move, like the landlord doesn't want a vacant space. If the space goes vacant, they're going to spend 9 to 18 months waiting to release the space. Then they're going to have a new tenant come in. That's not going to sign off on a bogus lease rate and pay above market like you are. They're going to be more competitive, and they're going to negotiate harder. And so the landlord's going to have to bring that lease rate down to get that space leased. Then that new tenant is going to want to renovate the space anytime. I don't care how nice the space is when someone moves out of it. You see every floor. You see, the flooring needs to be replaced. You see, all the walls need to be touched up and repainted. You see chips and cabinetry. And so that landlord is going to sit vacant for 9 to 18 months. They're going to end up with a lower lease rate, typically, for a new tenant, they're going to have to give free rent and other concessions. The landlord would rather just have you stay in that space, sign a renewal. And so, the game plan is to educate the landlord on we know how the game is played. You're going to lose $100, $200 grand if our client moves out. We're not trying to take advantage of you, but you've got to give us a fair deal. It's got to be you winning and us Losing is not a fair deal. We've got to both win. You keep a tenant, you dramatically reduce your risk factor of having a space go vacant for a longer period of time that you want. You cut down your exposure on what the new deal will cost, but you've got to give us concessions. You got to give us a fair deal. And when savvy landlords know that you know how to play the game, they just cut to the quick. It's kind of like if an attorney is working with another savvy attorney, they talk to them totally different than if an attorney is talking to someone who's not represented, like they know that the other attorney is not going to play that game. If the IRS is doing an audit and they're talking to an individual, they're going to talk to them differently. If they're talking to a savvy tax advisor, it's just it's not hard to figure out. Judges talk to attorneys different than judges would talk to an unrepresented person. And so it's not to escalate it to a lawsuit or to a tax, a tax situation, or an audit. But it's just one of those things where the landlords are asking themselves, is the tenant in the know, or can I get whatever I want to accomplish here? When they know that the tenants are represented, they just handle the entire transaction a lot more intentionally with respect. And ultimately, you typically get better terms.

Dr. Noel Liu:
That's huge, man, what you just said. I mean, it just makes total sense what you just said because this is like kind of deal like where you're going to be saving them so much capital upfront and along the way that is automatically going to pay for your services.

Colin Carr:
Yeah, it does. I mean, people always say, well, they'll say, all right, well, if the commission is built into the deal, can I still save money if I'm not? And it's like, no, because you're not the one cutting the check as the commission payer. Like if you were the landlord or seller, sure, you could choose not to pay commission or only to pay one. In that case, you would save money. But if you're the tenant or the buyer and the landlord is paying the commissions, you're not saving money by going it alone. You're literally just patting the landlord's pockets, or the listing broker gets a double commission. So the best example I can give you is this: every single dentist who has patients that have dental insurance, they run a report like in the, towards the end of the third quarter of the fourth quarter. And they see which patients still have benefits they have not used yet. And then they contact those patients, and they say the patient will call them and say, hey, listen, you've got enough money to do this, or let's get that filling taken care of, or let's get this done. Because if you do not use it, the insurance company is not sending you that check if you don't use it. They're not going to pay me for the unused portion. They're not going to reimburse you for the unused to use it or lose it scenario, right? And so that's the best example I can give is if you don't use a broker, the landlord just keeps it or pays their broker a double commission. And so it's really when dentists would look at how many patients didn't come in and use the remaining benefits that year, they're like, man, you just lost it, and so there's really no reason not to.

Dr. Noel Liu:
Exactly, exactly. Well, that was such a great nugget that you dropped. I mean, I think this is something which we should highlight, definitely. So, let me ask you this here. Why healthcare? And how do you know so much about dentistry?

Colin Carr:
You know, I've done a pretty broad segment of real estate. I've done the large retailers like Walmart. Like we said before, I've done large international companies like Honeywell and, you know, large publicly traded companies. I just liked working with the doctors. We definitely do large groups of practices and people that have dozens or hundreds of locations, and those guys function on a more institutional level, but I just like to work with the doctors. I remember the first dentist that I helped save him like $350,000 on a leash. You know, he'd been trying to negotiate with his landlord, was getting just completely annihilated in the negotiation. And someone said, hey, bring Colin. He did. I saved him $350,000. Like, that was super meaningful for me. I got him a nicer space. A bigger space saved him a ton of money. And just from a relational position, it was more meaningful to me. And then Walmart saving a little bit of money. That's great. But they don't really care. Like, right? You are a number to them. Where for me, my very first dental deal. I wasn't a number. The guy really cared about me, and I was it was very intentional about how Pam and I knew that it would make a difference for him and his family, and so for me, it just felt more meaningful.

Dr. Noel Liu:
I love it, so I have an example for you. I'm looking at a practice right now, and the space is leased. The practice is for sale, right? And what would you recommend, you know, going over there, speaking with a landlord directly or somebody like your caliber, going in there and looking at the lease for us, what's in place, and what needs to be done?

Colin Carr:
Yeah, that's a great question. So you never want to talk to a landlord until you know what's going on. And people say, well, I'm just going to ask them to send me this or that. Don't do that. Let the current practice owner give you their lease, or the practice broker give you their lease. That's step number one. Step number two would be to have someone like me or someone else review the lease for you and then give you feedback on the quality of terms. It's again, it's not uncommon when a lease is getting ready to renew in a year or two for it to be above market, so we're not concerned if it's above market. That doesn't stop a transaction from happening. It just gives us insight into what's available as you move forward. Now, if that doctor just signed a new ten-year lease and there's nine and a half years left, really, the only reason you're evaluating is just so that you have information to realize if you have a good, bad, or average lease. But if that lease is coming up for renewal in the next year or two, or it's coming up for renewal in six months, and you're going to have to deal with it, then the person you're talking to can say, let's put together a strategy and figure out how to get you back to a competitive lease rate, or let's figure out how to get you money to renovate the space. It could be a fair lease rate, but the space could need some upgrades. And so that stuff's all on the table. Sometimes, people buy a practice. Ten years left, seven years left. You just inherited. And then you live to fight another day. You wait till you get inside 12 or 18 months in the future, whether that's 5 years away, 8 years away, and then you renegotiate it. But if there's a chance for you to renegotiate that lease in the next, you know, year or two, probably you're going to be doing that simultaneously to buy into practice. And then a couple other quick pointers. You don't want the current doctor renegotiating that lease for you. Okay. They're not going to be there. You want to keep them out of that process. You also do not want the practice broker renegotiating that lease for you because they do not work for you, right? They have a legal obligation to help the selling doctor make as much money as possible in the transaction, and they might make you think that they're helping you because they're giving you information, and you can call them and ask them questions, but that's not your advisor, right? This is a person who has a legal obligation to help the selling doctor maximize their profitability. So you want an independent, neutral person that's not tied to the landlord, that is then tied to you. And that person will help advise you. Talk about how to handle the process. And again, ultimately, it's the same scenario. This current landlord does not want to lose any tenant, whether it's the current tenant they've known for 5, 10, 20 years, or it's you coming and buying the practice. They don't want a vacant space. And so we just want to make sure it's a fair trade. Good terms. And if we need to renovate the space, if you're going to get that landlord another 5, 7, or 10 years, that landlord needs to contribute financially to the deal.

Dr. Noel Liu:
Awesome. I know you mentioned about like you're helping like big groups as well, right? It's DSO, one of your specialty as well.

Colin Carr:
We do a lot of DSOs. Yeah, we do a lot of DSOs, MSOs, VSOs on the veterinary side; we do a little bit of everything. Our bread and butter has always been the sole practitioner, individual doctor, whether they own a practice or 2 or 5. But we have so many clients that we've taken from 1 to 20 practices, or 1 to 10, that we've just entered that space kind of automatically by the nature of how we help them. But we also do a lot of DSOs as well.

Dr. Noel Liu:
Great. Well, Colin, I mean, this is huge, man. I mean, you've changed my mind about getting help.

Colin Carr:
Yeah. I mean, there's a lot of analogies I could give, and people don't usually think this way, but, I mean, it's not hard for a dentist to look into someone's mouth and to see if they have a receding gum line. It's maybe not as obvious for a patient to see their own receding gumline or understanding what's going on. Most patients aren't going to be able to tell you if the color of their gum is right or if it's incorrect. You X-ray their teeth, and you can tell if you need to put a filling in or not, or if the roots that I mean, you just know these things because you have the instruments and tools, and certainly there's a very specific skill set that you employ when you perform the work. But analyzing someone and saying, hey, listen, we have too much crowding here. This is not right. We need to remove a molar. Like that's what you do every day. A really good real estate agent that knows the market, that understands how healthcare, real estate deals work, that understands the landlord's motivations. They're going to be able to analyze your situation very quickly, and then they're going to give you information and give you options. So no one makes the decision for you. No one forces you to sign a deal or not sign a deal. They're just arm you with information saying, let's come up with a game plan. Like if you want to stay in the space, that's great. But we've got to have other options that we compare it to. We've got to know what it looks like if you wanted to own real estate and purchase. If you want to look at multiple locations to expand, like we can't just pick one property and negotiate with one landlord; we've got to go at the entire market, look at 4 or 5 options, eight options, and then negotiate with 3 or 4, because we don't have a basis to compare any deal unless we have multiple options. Like if you pick one landlord and you start negotiating either on a renewal or a new deal, the only basis you have for comparing the terms are where they started versus where they end. But that's a terrible way to measure the deal. If you look at eight properties and you can do that literally in an hour and a half, two hours, you don't have to spend half an hour on every property. You can do it very efficiently. And then if your agent negotiates with 3 or 4 landlords simultaneously on a non-binding basis, if one landlord is giving $50 a square foot and build an allowance, the next one's giving $45, the next one's giving $55, and then one tries to say, we'll give you $10 a foot. Well, ten is better than zero where they started. But that's a terrible deal. You're leaving literally $180,000 to $200,000 on the table. And so having that information just helps you realize this is what's possible. And you can get away from things like, well, we never do that, or we've never done that before. That's not how the game is played. I wish I could, but my bank won't let me. Like, landlords throw all these like completely arbitrary and unilateral statements that have no basis, and then they're waiting to see if the doctor honestly is ignorant enough to believe it. And typically, they are. And so when you have someone who's savvy, they're like, that's if that's your stance, you don't have a deal to make here. We're going to move on to the other three landlords that are competitive. When they hear that, they instantly change their tune. And here comes the revised proposal with what you asked for. And so it sounds, you know, pretty straightforward. But it takes a strategy and it takes a way of saying things. So again, it's always done with respect. It's done with dignity and integrity. But if you don't hold the landlords accountable, they will steamroll you, and they'll do it with a smile on their face. And they'll send you a Harry and David gift basket with some pears after you signed a lease. And I've never had a landlord send me a gift before, and it's like, yeah, you just overpaid by $300,000. Like they're $40. Harry and David basket saved them, you know, saved them $300 grand. Like, it's amazing the way that people don't see what's actually happening.

Dr. Noel Liu:
Now, one last question for you. So we spoke about leases. What about triple-net? Like a lot of times, I see like these leases, they have like humongous admin fee management fees. Like they just kill it. I mean, like, they're almost equal to the size of the rent on the lease itself. Is that negotiable or is that just set in stone?

Colin Carr:
It's very hard to negotiate triple-net leases. It's very hard to negotiate any of the operating expenses. But what you can do to make sure that you're not setting yourself up to get taken advantage of is start by just asking for a line item breakdown of the operating expenses. And that plays whether it's a full-service lease or a modified gross or a triple-net lease, because what you're going to get from most people that are running their properties properly is you're going to get a like an Excel spreadsheet or like a QuickBooks printout, but it's going to have everything, and you're going to see the property taxes, property insurance, property management, and then you're going to see like historicals on electrical, on water and sewer, on janitorial, on landscaping, on snow removal, and then you can start to get a feel for if these numbers make sense. If you see a management fee, and the management fee is, let's say, the equivalent of like $1, $1.50, a square foot on the property, that's a regular fee or a 3% fee. That's a fair fee. If they're charging, you know, a 20% management fee, that's probably going to be egregious, and it's probably going to be an unrealistic amount of money, and the landlord's just pocketing that as more profit. So you can determine if you want to do business with those people or not, or if you want to try to address that. A lot of things, though. A lot of times, the triple nets are made up of the three-nets are taxes, property insurance, and then operating expenses. And it's not uncommon to see property taxes account for even half of the operating costs. Like our office that we have is in South Denver. It's in a suburb called Lone Tree. The taxes alone in our office space are $10 per square foot per year. I mean, you look at just astronomical and it's a complete abuse of the tax system. I'm not here to get political. I'm just saying like $10 per square foot, just on property taxes. I mean, a 4000-foot space, and we're paying over $40,000 a year to the county in taxes. I mean, that's I feel like it's personally egregious, but that helps to make more sense when you see what the operating costs are $15 a foot. Well, 10 of the 15 are taxes, so it's a little bit more palatable from that standpoint because we can't do a whole lot with the county. Then we break down that $5 a square foot and figure out all right how much that's going to utilities. That's a direct pass-through. How much goes to snow removal direct pass through. And so then you get down to the areas of management fees and reserves. Those are the two areas that may have a little bit of play. So management fees and then how much you're putting into reserves for the property, those concepts are able to be addressed or discussed. And if you're going to have any success on capping something or negotiating, it would come there. But I will tell you this: most landlords won't touch those things even when they're charging excessive amounts. They'll just say, that's the way I run the property. If you don't like it, go somewhere else. So at that point you're looking at how does this property compare to other properties? And even if it's higher than you want to pay, if it's still the best property, the best terms, it just kind of comes with the territory.

Dr. Noel Liu:
And you always recommend doing it before signing the lease, right? Getting the itemized breakdown.

Colin Carr:
Absolutely, because there's zero you can do afterwards. I mean, you can audit the operating expenses for most leases. You can ask questions, you can get a CPA involved and make sure they're not, you know, violating accounting laws. I mean, they are under accounting principles and laws. I mean, they can be found to be fraudulent or to be, you know, stealing money and so forth from the association or from the tenants. But you're just better off to do it ahead of time. Like most things, you're better to measure twice, cut once, and this is one of those areas for sure.

Dr. Noel Liu:
Well, Colin, I think that's it from my side. What else you got to add, man? I mean, you gave like a ton and ton of info. This is something which I think a lot of our healthcare providers, as well as our dentist colleagues, they'll definitely find it helpful for sure.

Colin Carr:
Yeah. I mean, the final advice I would give is simply this. Just hire great people in every area that you're not an expert in. And there's a reason that people, you know, go to an oral surgeon to have a tooth removed or an orthodontist have braces put on or do Invisalign. You go to people that are trained in an area that have a history of better results. And in real estate, typically, you're not actually cutting a check for their services, which is fantastic. But even in other areas, like you hire a really good real estate attorney, you don't hire your brother-in-law who does family law in Iowa if you live in California, like you hire people that are qualified in your area. You hire a good architect, good contractors, good attorneys. You get good insurance, you hire good marketing companies, you hire good real estate brokers like the top practices in the country. This is how they operate. And it's the same thing for the top companies like go outside of healthcare. Like Chipotle is not going to get taken advantage of on a lease because they hire the best brokers. They have the best attorneys. You know, you're not going to see Starbucks sign a bad lease. They just don't do that. Like they hire really good brokers, they know what they're doing, and they have a strategy. So if Lockheed Martin, or Charles Schwab, or any office or retail user is going to handle real estate with a very specific focus and make sure they maximize the opportunity, just do the same thing. It's literally once every 5, 7 or 10 years, no one's asking you to dedicate your entire life to a new skill set or a new career. Just hire someone who's really good. They'll help protect you. And then if they save you $200,000, $300,000, you do that 4 or 5 times over your career, and you'll find out that you've got literally millions of dollars of savings cumulatively over a 20 or 30 or 40-year career. And that's meaningful for most people.

Dr. Noel Liu:
And a peace of mind.

Colin Carr:
Absolutely. I know we're ending it, but I would say this, that peace of mind is honestly worth almost more than the savings. Nobody wants to wonder if they got a good deal or a bad deal for the next 10 years. Like having information, having the ability to just say, hey, I know that I got the best terms at the best properties that fit my budget that I could afford. That made sense, like I did the best I could with what I had. And that's a great place to be in any position, but especially in real estate.

Dr. Noel Liu:
Well, Colin, you just changed my mind, honestly. Like, you know, thinking about, okay, I need to get professionals because the way I look at it is I like to delegate all my weaknesses. Honestly, if I have an HVAC problem, if I have an electrical problem, who am I going to call? I'm not going to tackle it myself. So, like you just put it, man. You put it. I mean, like, I don't think you can put it any nicely. Because we, as dentists, we're always trying to see like, hey, we delegate everything. But when it comes to lease negotiations, we want to do it ourselves.

Colin Carr:
Absolutely.

Dr. Noel Liu:
And that's crazy. I love it. Well, Colin, hey, thanks so much for coming in. We're going to land the plane here. We'll definitely have your info there. Just verbally. How would they reach you or your agents?

Colin Carr:
Yeah. Best way to get in touch with us is our website. It's CARR.us. So C A R R.us, upper right-hand corner or on the nav bar. If you're on mobile, click to find an agent, and then you can pick your state. Pick your market. You can start a conversation with anyone that you want to. You can see different bios. Some markets, we have a lot of agents, some markets, we have a few. But you can see the different agents, or if you want to keep it simple, just click the Contact Us button. Basically, like literally, like check 3 or 4 boxes, and we'll have someone get in touch with you within a matter of literally a couple hours, and they can start the conversation. And whether you have a need coming up in the next year or two, or even if you just signed a ten-year lease, but you're just curious how you did, we'll give you the time you deserve and set you on the right course. And even if you're ten years out, we'll still give you the time, the conversations and give you a few tips in the meantime.

Dr. Noel Liu:
Awesome. Thank you so much. Appreciate all your info. All right. Great. So ladies and gentlemen, make sure you like and subscribe. We know Colin was a great, great help. Make sure you look up for his agents. And if there's anything that's coming up related to leasehold improvements or lease in itself, definitely hook them up. All right, Colin, thanks so much.

Colin Carr:
Thank you.

Dr. Noel Liu:
Thanks for tuning in to the Secure Dental Podcast. We hope you found today's podcast inspiring and useful to your practice and financial growth. For show notes, resources, and ways to stay engaged with us, visit us at NoelLiuDDS.com. That's N O E L L I U D D S.com.

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you'd love including automated translation, secure transcription and file storage, automatic transcription software, enterprise-grade admin tools, and easily transcribe your Zoom meetings. Try Sonix for free today.