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Why leasing fees are paid at the beginning of a lease!

8/20/2013

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Do you ever wonder why leasing fees are paid at the front end of a lease?  Do your clients ever ask to pay you the leasing fee over time?  Good leasing efforts should be rewarded with good leasing fees, because it does offer the landlord a better investment...and better investments cost more money.  

I am sharing this actual email (names removed) response to a client wanting to pay a portion of the leasing fee every year as long as the tenant remains in the space and paying rent.  I think it applies to most every situation when the client wants to change the rules when the game is already finished (leases signed, money exchanged, keys handed over, etc.).  Feel free to use this response as you see fit!

Hello Mr. XXX,

I appreciate your concern for paying a full leasing commission on a X year lease at the front end of a lease because neither of us know if the tenant will be around for the full term and live up to their obligations.  Many people own commercial real estate as an investment, much like purchasing stock or bonds.  We then hope our stock or bond price increases and/or gives us dividend payments. The stock brokers, be it someone with a fancy river front office or a discount online broker, don't offer guarantees on future stock/bond performance. If the investment you decide to purchase doesn't live up to expectations, that is part of the risk of investing and brokers don't refund fees based on poor performance. Signing a lease is much like purchasing any investment in that you hope the tenant will provide some predictable cash flow. Part of procuring that tenant and having that investment choice is the leasing fee, which should be factored into the investment decision.

Having said that, longer leases offer the landlord some assurances and some security that the tenant will be around a little longer than a short term situation to pay the lease, but it does not guarantee it. A longer lease hopefully provides more predictable cash flow for a longer period of time, and it should help decrease vacancy and reduce re-tenanting cost. For this more stable investment, part of the extra cost is an increased leasing fee.

I already dropped an invoice in the mailbox today to you, and I did send a Thank You card to the broker that brought us the tenant to your building.  As for the leasing fee, I will be sending Y at Z his full fee by weeks end from my account, because I am appreciative of his efforts and he is expecting payment as agreed upon per the contract.  If you feel you would like to pay different than as stated in the contract, I am happy to sit with you and discuss. I am available on Friday at 2PM if you would like.

XXX, I appreciate doing business with you, and I hope you understand my thoughts and efforts.

All the best,

Jay Story, CCIM
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We're small time.

4/29/2013

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In a world that seems to be moving away from the personal touch and attention to detail, I am predicting a "swing to real" where people interact with people, bigger doesn't always mean better, and quality over quantity will have meaning again.   I have been working with Rizen Creative, and I knew they had figured out Story Commercial when they came up with this ad for me.  Cheers to small time!
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Don’t get backed into a corner w/ your commercial space!

4/22/2013

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5 Good Reasons You Need Representation

1.  Your Landlord wants you to pay more rent.
If you are negotiating directly with your Landlord or their representative, remember that they look after the Landlords’ best interest…not yours.  They will use any information they have at their disposal to negotiate the best deal for the Landlord, which often means higher rent and more restrictive lease terms for you.  Protect yourself and a professional to look after your best interest.

2.  Use market conditions to your advantage.
A commercial real estate professional can help you look at all the options and give you market knowledge.  Most likely there are multiple properties that will suit your needs, why not put multiple offers out there and take the best one?  Even if you intend on staying in your current location, when your landlord finds out you have other options available and an agent working for you, they will be more likely to cut you a better deal.

3.  Negotiate favorable lease terms.
Landlords are not going to offer you the best lease terms, but if you hire a professional to help you, these terms can be negotiated directly into your lease.  Items like renewal options with predetermined rents, right of first refusal, free rent clauses, money for tenant improvements, or buyout clauses are some terms that could be negotiated on your behalf.

4.  Save your time.
Driving around and calling on signs is not the most efficient way to find space.  From a sign, it is hard to tell the size of the space, the price, the landlord motivation, or any other item that a professional may know about the property before calling.   Hiring a professional to assist you will save you time when they do the upfront leg work and present you with the properties that suit your needs, and help you through the contract negotiations. 

5. Peace of mind.
When the deal is inked, it is nice to know your best interests have been protected throughout the real estate negotiation process.  Knowing you are paying a fair rent and have a fair lease, gives you one less thing to worry about.

PS.  When you're looking for someone, you might as well hire the best and get a CCIM to work for you.

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I don’t have a buyer for you!

4/19/2013

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As I approach my 11 year anniversary in the commercial real estate business, I am grateful to have survived one the largest real estate downturns we have ever seen.  How did Story Commercial survive while some did not?  I like to think we survived because at Story Commercial we look after our clients’ needs first – not ours!

This may sound a little ridiculous because aren’t all agents required to protect their clients’ best interest?  One thing we do at Story Commercial that is different than most real estate agencies is offering only “single agency.”  This means there is a clear line as to who we are representing, and we are working to get our client the best deal.  We are NOT representing both sides.

If my client is the Seller, rest assured I am using every tool in my toolbox to get them the highest price and best deal, and that includes marketing to ANY potential buyer.  Now, if my client is the Buyer, rest assured I am using every tool in my toolbox to get them their best deal. 

Another agent was recently telling me how he received an offer on one of his listings from a buyer who happens to be a licensed real estate agent and wanted to partake in sharing the commission.  This listing agent then told me he was going to stop sending this buyer/agent their marketing material because he had to share the commission with him.  Whose interest is being protected in this situation?

So when a prospective listing client asks me, “Do you have a buyer for my property,” I reply, “I probably do not have the best buyer for your property, and my job is to make sure we find you the best buyer.” 

At Story Commercial, we draw a clear line on agency (everyone knows which party we represent), we love sharing the commission, and most of all, we thrive by making our clients’ best interest, our best interest.

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    Jay Story

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story commercial, llc
104 s capitol blvd suite 201
boise, id 83702
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