Are you wanting to get into the real estate game but don't know any of the lingo? Parse through this plethora of lessons where you will learn the meaning and specific application of dozens of real estate terms taught by the incredibly successful Michael Burer.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Breakpoint: The sales threshold over which percentage rent is due. It is calculated by dividing the annual base rent by the negotiated percentage applied to the tenant's gross sales.
Lesson Nugger: The breakpoint represents the negotiated revenue number above which a retail tenant would share a portion of their revenue with the landlord.
Ask Yourself: Would utilizing this option of a breakpoint be beneficial for my lease agreement?
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CLAY CLARK: We are here today joined in sunny San Diego with my beautiful friend Michael "There-is-no-real-estate-topic-too-obscure" Burer on Thrive15.com, an alternative to lynda.com . And we are talking about breakpoint, a topic I know that you're excited about, because you obviously have come to this part of the website. So we're going to get into it. I'm going to read the definition, he's going to explain to me what it means. So here we go.
The sales threshold over which percentage rent is due. It is calculated by dividing the annual basis base rent by the negotiated percentage applied to the tenants gross sales. Michael, what does this mean?
MICHAEL BURER: So, typically found in a retail lease. So for a restaurant or a shopping, some kind of a shopping center type of a lease. And for a tenant who, let's say they have $100,000 worth of revenue. Over that certain point, over that breakpoint, whatever the cutoff is, they would pay percentage rent or a percentage of their sales to the landlord. So in negotiating that, where that kicks in, it's called the breakpoint.
CLAY CLARK: I want to give an example. I have a business that I know about that, it's like a pub.
MICHAEL BURER: Yep.
CLAY CLARK: And they didn't have a lot of money. And they leased out the space, and they said hey, once we do more than $1 million a year of sales, we're going to split some of the revenue with you, landlord, who's given us a good deal. Is that a good example of a break point?
MICHAEL BURER: Exactly. So that pub would have a base rent amount, where they pay no matter what. And then once their sales get to a certain point, beyond that breakpoint, they would pay a portion of their revenue to the landlord.
CLAY CLARK: So if I'm a Thriver watching this and I'm thinking about leasing space and I don't have enough money to pay the monthly rent. Can I go landlord and say hey, I want to set up a breakpoint here. I want to say once I bring in this much revenue, I'll pay you a percentage of it?
MICHAEL BURER: That's right.
CLAY CLARK: Awesome. For any of the Thrivers who are wondering what's that sound that's rumbling, that thing. That's a landscaper, that's somebody moving, that's a seagull, that's a boat, that's waves. That's-- it's just the ambiance of San Diego.
And really, I want to let you know this here, because this is of that I've been cherishing and waiting to tell you. I appreciate you in the same way that a surfer appreciates a fresh coat of wax on that sweet, sweet board. Now that's not funny to me. I'm just laughing because I'm shocked at how little you appreciate the words I just said.