We just had a discussion in our group where some docs were disgusted with their real estate agent and the next time around don’t want to use one. Well, they probably didn’t read this post we wrote about how to find an agent, as well as this article about how to pick a real estate agent. Read these carefully and interview at least three agents (preferably ones recommended by colleagues in your area or your medical society). Even better if they specialize in medical commercial real estate from the buyer/ lessor’s side. This is obviously easier to find in bigger cities; if you’re in a small town there may not be someone who specializes in medical offices.
Both Ho Sun and myself are skeptical of the so called “experts” who try to swindle docs from their money. In our opinion these include but are not limited to: asset under management or salesman in disguise financial advisors, most accountants, marketing “experts”, billing companies, and practice consultant advisors.
In residential real estate you can learn a lot by looking at comps, but unless you’ve seen the interiors and upkeep as well as the location of the homes, it could be hard to determine the value. Commercial real estate is even less transparent, my understanding is the comps won’t tell you how many months of free rent or tenant improvements the landlord gave you. That’s why I advocate getting a commercial real estate agent.
From their experience negotiating multiple deals, they will be familiar with what’s “standard” in terms of landlord concessions, which are subject to changes in the market. I’m about to renew my lease, and the market is much tighter than in 2013. My rent will be significantly higher, and I’m getting less free rent as well as significantly less in tenant improvements.
There are many conflicts of interest for a residential real estate agent: they want you to buy the most expensive house as soon as possible, so they can get the highest commission for doing the least amount of work. They aren’t experts at calculating whether or not you can afford it, or when the hot water heater and air conditioning break, whether you can afford it or have to pay 22% credit card interest on it.
Of course there are also conflicts of interest for a commercial real estate agent. They might have equity in a building that you are considering purchasing or leasing. They will get paid more if they steer you to a more expensive property, or if you sign a longer lease. Here is an article that describes some of the conflicts of interests vs the pros of using a broker (I don’t know if this was written by a commercial real estate agent, which would be a conflict in itself!) Having said that, I agree with the principles of the article.
A good agent will put the client’s interest first. My broker actually recommended for my 2018 renewal that I sign a lease less than five years (length of my original lease) because the market was hot right now and might cool off, in addition to giving me flexibility if my practice grows and needs more space.
One of the biggest conflicts of interest is if the broker represents two tenants vying for the same space. Of course, after I retained my broker, the space I wanted was one that another of their clients was negotiating on. The other client had spent months going back and forth debating whether they wanted the space, even signing a letter of intent. I was about to submit a letter of intent for a less desirable location that would cost more in time and money for tenant improvements, but my broker gave the other group a hard deadline to take the space or not. They declined and I got the space I wanted! So it worked out for me. I felt they handled my situation very professionally, and they disclosed the conflict as soon as they learned I was interested in the space.
I’m actually buddies now with my broker, we watch basketball and talk about investments together. So I don’t think he’s out to take advantage of me. Cataract surgeons also have conflicts of interest, we all know the folks in town who steer everyone towards premium lenses and do surgery on patients who refract to 20/25 without visual complaints. But this doesn’t mean that you shouldn’t see a cataract surgeon if you have trouble seeing.
Do your due diligence between hiring a broker, and constantly look out for conflicts of interest even if you completely trust your broker, but I’d like to think most good brokers will be your fiduciary and do their best to represent you and find you the best deal for your property.