New Series: Real Estate and Related Terms Explained

Over the next several weeks we will be doing a new series on the blog. In a nutshell, each week we are going to choose a term that we often find that is either confusing or misunderstood in our travels with our clients. We will define the term in verbiage that is easy to understand and expand on the concepts where necessary.

After this series we hope that you will be able to talk confidently about many real estate related topics. Sometimes, there are different terms for different items in different jurisdictions. For example, in Ontario (where we live and sell real estate), we use the term Condo for condominium ownership, whereas in British Columbia, they use the term Strata. So therefore, as experts in Ontario only, we will focus on terms used in our market.

The first post next week will be regarding a term that we get asked about a lot…triple net.

Readers: are there any terms you find confusing that you’d like us to touch on? We’d like to make this series informative so we’d love to hear from you.

THE TENANT PLAYBOOK: Negotiating with the Landlord

Having now identified the 'premises' of your operation, what are the next steps to follow as you approach the Landlord? As noted earlier, hopefully you have engaged the services of a qualified leasing specialist to assist in negotiating a lease deal with a particular Landlord.

The first step is to qualify yourself or your operation with the Landlord. In short, this is a background/bio of your business and your credentials as a Tenant.  This might include years in business, expanding/downsizing, number of employees, and why these new premises are "fit for the future".  Depending on the situation, you may need to provide financials (particularly if the Landlord is providing significant TI dollars), a credit report and/or references.

In the case of a ‘new start-up’, you may need to provide a Business Plan which lays out your sales projections, expenses, capital investment requirements, and working capital needs. Given the fact the business is new, this should be supported by your credentials on a personal basis. Landlords are typically adverse to new start-ups. The more details you can provide at the outset the better. Be prepared to have a conversation on a PERSONAL GUARANTEE, particularly if the Landlord is investing capital on your behalf into the premises.

Beyond lease rate terms (the dollars of the deal), what item or items are most significant to your future in this location? Is it a suitable TI allowance? An extended rent free period? Dedicated parking? Early termination rights? Restrictive covenants on neighbouring businesses? Whatever the key elements of the deal are, you need to make sure they are front and centre as you begin the negotiation. The key points need to be 'on the table' now when finalizing the formal lease document, not left for the lawyers to deal with.

Successful lease negotiations do not just happen, but are planned for and well-executed by Tenants and their Leasing Representatives. As with everything in life, you do not get what you deserve, but rather what you negotiate. 

Next up from the TENANT PLAYBOOK: papering the transaction and types of documentation. As always, we're just a click or call away from discussing investment opportunities here in Windsor – Essex!

Bonus: Investing In Real Estate – Building the Right Team: Mentors & Education

Ask any successful real estate investor and they’ll be sure to admit that they haven’t invented the wheel. They have taken ideas and concepts from other landlords and incorporated them into their investing business. The learning curve is much easier when you aren’t starting at square one.

Why do I need a mentor?

One of the best ways to learn the tricks of the trade is to find a mentor who is a successful real estate investor.  It's often that successful landlords enjoy talking real estate and will be happy to share some info. Pick their brain. Even if you take a few concepts, or learn to avoid a few mistakes over time, they can make you money or save you big money long term.

How do I find a mentor?

The best way to find a mentor, or like minded real estate investor, is to network. Look to see if there is some sort of real estate investment club in your local area. Talk to your realtor or other professionals on your team to see if they know of anyone they can refer you to. Networking is key in any business and having successful contacts can very much help you investing business.

What else should I know about staying educated?

Besides having a mentor, it is important to keep investing in yourself as a real estate investor. Continual learning will improve your understanding of the business and keep you sharp. There are numerous books on the subject, online classes, in-person seminars, and of course, blogs (like this one ☺) that have lots of information to keep you up-to-date on what is happening and what you need to know in your market.

Don’t be lazy. Aim to improve yourself continually and your investment business will thrive. Readers, do you have a mentor? What do you do to keep continuing your real estate education?