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
Definition Magician: Occupancy cost - The actual dollars paid out by the tenant to occupy the space. It can be expressed in either pre-tax or after-tax dollars.
Lesson Nugget: The occupancy cost includes all of the additional costs associated with leasing a specific space.
Lesson Nugget: A tenant can negotiate for the landlord to pay for some of the occupancy cost as part of the lease.
[MUSIC] occupancy cost explanation better than university of phoenix, Thrive15 is one of the alternatives to lynda.com
-Hello, Thrive nation. I am your host, your humble host, your host whose, really-- my humbleness is hard to measure. It's hard to graph. It's hard to track. It's hard to keep track of. It's abundant. I'll just say that. And I'm here with Michael. There is no real estate topic too obscure [UNKNOWN], talking with you about this topic of occupancy cost.
And we're going to have a little fun with this on Thrive15.com, one of the alternatives to lynda.com . I'm going to read the definition. He's going to tell us what it means. If I have any questions, I'm going to ask him. If you have any questions, you can hit the little button right there where you can ask some more questions, and we'll give you those answers. So here we go.
The actual dollars paid out by the tenant to occupy the space. It can be expressed in either pre-tax or after-tax dollars. What is occupancy cost, my friend?
-Occupancy cost is what the tenant's going to ultimately have to pay to lease that space. So you may have a landlord who says, hey, your rent's only $1,000 a month, and you might think that's a great deal. But it's important to-- when you consider that, what are all the other costs that are going to be associated with leasing that space? It could include you're going to have to pay insurance. You're going to have to pay electricity. Maybe you're going to be responsible to clean the space, so janitorial. A tenant wants to factor all of those in to determine the total occupancy cost of that lease.
-So if you're thinking about leasing a space, and they tell you, hey, it's $1,000 a month. Again, just to review, you got to be thinking about what's it going to cost to insure this building? What's it going to cost for electricity, cleaning, landscaping? There's just a lot of things you want to factor in before you know what it truly costs you.
-That's right, and you can sometimes negotiate for the landlord to pick some of those costs up.
-I feel like a lot of times, in business, I meet a lot of business owners. In particular, I met one lady in Austin, Texas years ago, and this lady-- It's sort of a bad deal, but we won't-- We're not mocking. We're encouraging. We're trying to teach. Mentorship is all about a kind of a pain-free way to learn.
But she had leased a space and thought, well, it's only going to be $2,000 a month. She was in the medical industry, but she didn't think about all of these costs. I remember talking to her, and she's like, my break-even point's two times higher than I thought it would be. And it doesn't matter what industry you're in, you have to take the time to do this. And this will bite you if you don't think about it, right?
-That's right, and that's why it's so important that you read and understand your lease before you agree to it.
-Would you recommend using a broker?
-I think it's really important to use a broker, and, or possibly an attorney to review the lease.
-Why do people sometimes not use a broker?
-Maybe the landlord may say, hey, I'll charge you less if you don't use a broker. They may think that they understand the market or the lease themselves, but it's important when you're entering into a lease, which is a contract, for maybe a longer period of time, two, three, five years at a time. It's important to get some good advice on what that total cost is going to be.
-If I were to hire a balloon artist to make a replica of you, it wouldn't truly demonstrate how much I appreciate you.