Podcast Episode 86 – Making the Right Real Estate Decisions for your Practice – Trisha Talbot
Episode 86 – Trisha Talbot is a real estate advisor who specializes in healthcare real estate investments, advising her clients throughout the sales process with comprehensive strategies on pricing, market fluctuations, and solutions to close the transaction. She helps healthcare providers in making the right real estate decisions for your practice. Together with her team, landlords benefit through stabilizing their property with leasing and then monetizing their asset.
As a leader in the Arizona healthcare brokerage community, Trisha and her team have represented a majority of medical office buildings in the Phoenix Metro area and are recognized for their production and performance annually. This is a must-listen who has any future plans to own real estate as part of your medical business.
Click here to download your free CME credits for listening to the show!
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Free Resource: Conference Attendance Checklist
For today’s free resource, I’ve got a great new guide called the Conference Attendance Checklist. As 2021 winds to a close, a lot of the national medical societies are getting back to live, in-person conferences. If you haven’t been to a live conference in a while, you need this guide. Even if you’re going to a virtual conference at some point, download this free resource. Conferences offer incredible opportunities and a little preparation ahead of time can really help you make the most of the experience.
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Check out the additional free resources available at The Scope of Practice!
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Meet Trisha Talbot
Trisha Talbot advises physician owners and investors with opportunities in the healthcare real estate asset class. Her track record in investment sales, landlord representation, corporate representation and tenant representation offers clients trusted experience with comprehensive strategies with pricing, market fluctuations and problem solving solutions that result in successfully close transactions.
Aligning the real estate investment requirements of property owners and physician investors together with the corporate goals of the healthcare companies that occupy medical facilities has made Trisha a leader in the healthcare real estate brokerage community. Her performance and production achievements are recognized annually.
Trisha lives in Scottsdale, Arizona with her wonderfully patient husband and two gracious children that support her drive to make an impact helping clinicians share their gift to heal others.
Connect to Trisha Talbot
Most physicians and dentists come out of training programs with a huge amount of personal debt and little to no idea of how to actually run a clinical practice. This Facebook community is for anyone who wants to learn more about how to manage their business more successfully and master their personal finances.
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Access the Show Transcript Here
Making The Right Real Estate Decisions For Your Practice
2021, Brent Lacey And The Scope Of Practice Podcast
The Scope of Practice Podcast
[0:00] My wife and I lived in apartments and rental homes for 11 of the first 14 years we were married until we finally bought our current home earlier this year man are we glad to be done with that it was a.
Long and involved process
but you know over the years I’ve talked to a bunch of friends that have either bought or built houses and they all agree that the quality of the experience really depends on your realtor and fortunately we had a really great one but you need someone in your corner
to help you make the right decision that can be the Difference Maker but the same holds true for your business you’re buying a several hundred thousand dollar or million-dollar-plus asset and you want to make the right decision
and that’s why I’m so excited to have today’s podcast guest to coach us on how to buy or build the right building for our Medical Practice let’s kick it it’s not.
[0:55] Welcome to the scope of practice podcast where we help busy Healthcare professionals learn to manage their businesses successfully in master their personal finances now here’s your host dr. Brent Lacey.
[1:08] Hey y’all thanks so much for joining me for the scope of practice podcast where you can get the knowledge and resources you need to grow your leadership skills your business and your personal finances.
Welcome to episode 86 if you haven’t already subscribe to the podcast please be sure to go ahead and hit that subscribe button right now and also hit the button at the top of the podcast player to turn on the automatic downloads that way you can listen to these episodes anytime.
Anywhere even if you end up in a hospital or someplace where there’s just no good cell phone service to stream.
Also don’t forget the podcast is eligible for category 1 CME credits now and it’s totally free just click the link in the podcast description or go to www.desktoplearn.com / podcast CME to download your CME credits for free.
[1:52] The marriage and money MD Summit last week was amazing oh my goodness for all of you who came out.
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I’m telling you you missed an awesome Summit but good news we’re going to package it up into an online course that you can watch anytime
I’ll have more information on that in the next couple weeks but in the meantime you should check out our new online course residency proof your marriage.
This online course is a self-directed six-week course that will help you build a strong relationship that thrives despite.
[2:29] The stress and strain of a medical career and you all know what I’m talking about it’ll coach you through setting expectations communicating effectively getting on the same page with your finances and keeping your relationship thriving during a difficult times.
Whether you’re a medical school residency or out in clinical practice residency proof your marriage is going to help you build a thriving medical marriage.
Trust me this is a very inexpensive investment in your marriage.
A weekend marriage Retreat is going to cost you upwards of a thousand dollars once you factor in food registration lodging babysitting vacation time lost work but for this course you get all the great content for a fraction of the cost and you can complete it on your own time.
As your schedule allows click the link in the podcast description or go to www.desktoplearn.com marriage course to sign up today.
[3:16] The course is also eligible for CME credits so you can use your employer CME funds to buy it click the link in the podcast description to sign up my guest today is Tricia Talbot.
[3:26] Tricia is a real estate advisor who specializes in healthcare real estate Investments advising her clients throughout the sales process with Comprehensive strategies on pricing Market fluctuations and solutions to close the transaction.
She helps health care provider clients and establishing real estate portfolio strategies align with their corporate goals.
[3:44] Together with her team landlords benefit through stabilizing their property with Leasing and then monetizing their.
[3:51] As a leader in the Arizona Health Care brokerage Community Trisha and her team of represented a majority of the medical office buildings in the Phoenix Metro area.
And they’re recognized for their production and performance annually I learned a lot during this conversation and I hope you will too so here is my conversation with Tricia.
[4:14] Hey y’all I am so excited to welcome my guests today to the scope of practice podcast she’s a healthcare real estate advisor and founder of Doc properties Trisha Talbot Trisha thanks so much for joining us today.
Thank you thank you for having me yeah so Trisha I’m really fascinated to talk to you about this subject.
[4:31] I think at some point in the private practice Journey everybody at least starts to consider.
The idea of owning their own building and maybe that’s at the very very beginning of their Journey you know they’re opening their practice like I’m going to build something I’m going to buy something to do it right now.
Or maybe they start off just Leasing and then eventually they get to a point where like you know I would love to just have my own space and I think it’s something that we always consider.
But the thing that was that was interesting to me was to realize that you know after talking to you for a bit is that there’s.
[5:01] People that specialize in this it’s so funny to think about that because I think about folks in real estate I think about commercial versus maybe residential but I never thought about it getting significantly more specialized than that but you really deal with medical real estate
primarily like that’s your Niche thing how did you come to specialize in medical real estate why is that so exciting for you
well I started out wanting to get into commercial real estate and there’s various flavors of that and I wasn’t quite sure exactly what I wanted to do and when I was finishing up my graduate degree I worked for a developer of medical office buildings and I actually did a marketing or
report for a new on-campus building that they were developing
and then I started to work in their leasing department and I felt you know like I had found I had found my calling I really enjoyed working with Physicians I felt like I was.
[5:55] One I was doing good you know I was helping them find space and operate
the thing with medical office that’s different with the other flavors is you know that it is Mission critical and demand-driven and there’s obviously other real estate that is Mission critical and demand driven but Physicians they cannot do procedures out of their home you
you know if you need Emergency Services you have to go to a hospital you have to go to a facility to have surgeries and even with Telehealth being and I think.
[6:23] Tool that will I think enhance Health Care you have to go to a physician for an in-person exam so I felt that this was
part of real estate that was going
you know back when I started it was the.com boom but I was seeing that technology was becoming so prolific and I’m like you know at some point not everyone’s going to have to come into an office to work
you know if they don’t need to and that’s not going to happen with Healthcare it can
functionally it cannot sew and more I got into it and you know just just helping these Physicians they’re working all day long and they
I do need some help and they need the information quickly they need accurate information they need to make decisions they don’t have time necessarily nor do they have a desire to want to go and some do but typically at the end of
your day of seeing patients all day you don’t want to have to come home and
figure out all of this real estate stuff so if you have someone that says hey you know during the day there’s these five documents you need to look at here’s what you really need to pay attention to here’s what I would send to an attorney here’s what I would you know have you know I
I would recommend sending to a contractor just take a look at them let me know and then also
I will then you know send them to all of these advisers for you obviously copying you on all of them but really sort of taking taking things off of.
[7:50] Their plate and then at the end of the day
you know altruistically helping them care for people so it really became like this full circle I felt like I was
doing something good also helping these busy professionals and I like working with them they are Highly Educated they
are fast pace for the most part like to get things done and
you know it was just a great connection with who I am and so it kind of
blossomed from there well it’s wonderful well let’s Dive Right In and talk about this concept of buying up medical spaces buying up a medical facility owning your own piece of Real Estate
in any kind of business venture there’s going to be really two things that prevent us from doing something one is going to be time.
And when it’s going to be money so let’s talk about the time aspect of things first because the number one thing that I hear from Physicians is
I just don’t have time to add something else on my plate I’m there wall-to-wall with patients they’ve got all these different
quality metrics they got to be meeting you’ve got all these different credentialing things and it’s just it’s just there’s no time to think about this stuff and there’s no time to think about the idea of running your own space you know and having your own.
Real estate your own facility so how does a clinician own medical facilities.
[9:14] And still practice medicine well that’s kind of it literally the million-dollar question
so I work with like for example I spoke to a hand surgeon yesterday he and his son are in a practice and they are looking to open a surgery center in a medical office but then want to buy a bigger building to also have an ID.
Income investment and on that scale you know SBA is a great.
[9:39] Is a great tool for the money part but the time part you know when I asked and this is the question I always ask you know do you still want to practice medicine
during the day and you want to have a part-time job of managing the real estate afterwards and most typically don’t if they’re still actively practicing quite honestly they would make more money.
[10:03] Doing more surgeries than they will managing their real estate so
there are proper there’s professional property managers that that also specialize or have a primarily focus on managing Health Care properties and and that has to do with the fact that hazardous waste is has to be.
[10:23] A part of a medical office building but also you know cleanliness especially I think now out of the pandemic your medical office buildings typically have to be really clean and
yeah it’s just I think you feel better as a patient going into a building that is clean versus not a lot of medical practices do their own janitorial but
they have to do a really good job they have to have access at night you know there’s just certain things that have to be managed if you have a surgery center that’s a whole different level of cleaning that needs to be taken into account so
there are there are people that can help these clinicians manage the day-to-day there’s property the property manager not only handles the vendors for janitorial but they do
property accounting which is a huge thing collect the rents send out late notices if needed you know manage the budget for them so they.
[11:17] They really don’t
have to be in the day-to-day they can just meet maybe quarterly with their property manager monthly if they want to depending on how Hands-On they want to be but
developing a relationship with a good property management company so that they don’t have to be in the day-to-day weeds of managing a piece of Real Estate
nice and I guess as an alternative to that if someone had say it an office manager or someone who is a facilities manager maybe for a larger practice or an operations manager for smaller practice something like that someone else could take that off their plate while the so they can focus on medicine
I think that would probably do
about the same thing so that definitely makes that concept more accessible so okay so let’s talk about the money side of things then so one of the things that I know a lot of people like to do when they’re first especially when the first starting out
is instead of buying a place or building a place they’ll lease some medical space and there’s some advantages to that.
[12:10] But the downside is that you don’t own your own place you can’t design it the way you want and so it’s there’s there’s some pluses and minuses can you kind of walk us through.
When you are sitting down with someone and they’re contemplating buying versus leasing what are some of the
pros and the cons of those two strategies from money standpoint so it really it also depends on the specialty so if it’s more of a
like a community medicine like Family Practice Internal Medicine OBGYN pediatrician they can go into a second gen if they’re starting out on their own they can typically find a second-generation space that is
probably about 90% there and they might be able to with paint and carpet make it their own when you get into more I would say there is
like a procedure room and if they’re doing any Imaging what’s so Imaging.
[12:58] Has a ton of expense but what happens is you start analyzing the amount of tenant improvements that the practice will have to spend inside.
Building and when you analyze that sometimes those costs are incredibly expensive new plastic surgeons that do do some procedures in there.
Office just like I had mentioned this to hand surgeon they want to have 20 ours in a procedure room that is an expensive build-out and when you start
taking the common-sense approach and saying hey I’m going to dump you know hundred and fifty two hundred eighty five dollars a square foot into a building and I don’t
own it and after 10 years I have to probably sign up some more time on to that lease you know it’s like well you know if I bought a building and even if it’s an Adaptive reuse where you’re just buying a shell of.
Something cutting it down to the walls and then building it out over that same 10 years it kind of makes sense.
[13:59] To some degree and depending on where you live to own the building rather than put those T.I.’s in and then lease the building you build equity your there’s a lot of things that a practice may go through they might become part of a.
Bigger practice maybe a hospital will buy them you know and if they have their own building you know just makes it a lot easier there’s obviously you can refinance throughout the time but.
I think if you’re if your cost for tenant improvements is
high enough it really I think gives you more flexibility and I would say stability and also just in
better use of your investment dollars to own your property to yeah and certainly that’s that makes sense from a long-term standpoint is the same kind of thing with residential real estate in the long run home ownership is an important Cornerstone for any financial plan
you just do better if you’re putting money into a property that you actually own as opposed to renting forever.
[15:00] On the front side of things there you know as you’re first getting started as your newly in practice or your as a student or as your newly married those kinds of early you know transition times.
There’s a lot of value in renting because maybe you don’t know what you want and you’ll make a more informed decision if you’ve rented for a little while and you can live in a place and see what your what kinds of things you want and
you’re saving money you’re able to make a more informed decision especially if you’re just moving to a new area because a lot of people they go let’s say they graduate from Residency program in Chicago and then decide to move down to Miami where they’re closer to family
but they don’t know the market very well so.
They’ll make a more informed decision if they’ve been living there for a couple of years and can see what the traffic patterns are and where people live and where their practices evolving and things like that so yeah I definitely see that’s a lot of thought needs to go into that decision.
Yeah and the capital side you’d mention about the capital side so you know if you’re just a single practitioner you’re a practice of maybe you know handful of Physicians you know SBA is a great tool to get started and they have whole programs.
[16:06] Specifically for Physicians and healthcare companies and then you know if you are bigger than that and you know
several million dollar company you’ve got obviously some track record there are there’s a whole host of private Real Estate Investors that
specialized like they will actually joint venture and bring the capital to a development so if you’re a practice and you’ve got some Financial strength and some
they will partner with you so that you don’t actually have to outlay the capital they do want a commitment there will be some sort of either
get a shared capital investment maybe a lease or something like that but there is a way to get some joint venture capital.
[16:51] That allows you to still have some control and ownership into the building but you you
partner with these Capital providers and experienced developers that can really help you I think that’s one of the things that you know Physicians wrestle with is that they’re like I have to
take on all this debt I have to go you know I’m already in debt and then I have to take on all this other debt like when does it ever stop and that I think starts to get analysis paralysis and prevents them from expanding if they want to do that but if they do have an expansion plan there’s always a way to do it
and find a Capital Partner that works with them not all are the same but you know
there can be somebody like myself that understands the personality of a practice and then knows the partners that might make the most sense for them to talk with and put them together
yeah and so we had an episode 48 we had Mark Rai bolt-on from the Coker group talking about private equity.
And we talked extensively about the importance of really selecting the right partner because it is easy.
[17:50] Easy to find the wrong partner and end up getting hosed in the long run.
Because you just do your due diligence so yeah it can be very helpful but definitely need to do some serious research and make the right choice there.
[18:02] Okay so definitely got a good sense of leasing versus
owning your own place now let’s break down owning a little bit further if you want to own your own place you got a couple of options you can buy an existing space
or you could build your own place from the ground up and there’s some pluses and minuses to both options so maybe you can walk us through how you think about that and how do you coach people on which is the best option for them at that time
so when you’re looking at building a building there is the cost of the shell and then the cost of the tenant improvements and then
along with the cost of the shell there is Hearts obviously the hard cost of constructing it but then there’s the soft costs of architectural fees and there’s always people that need to
manage the project so there’s some project management fees as well so if you can buy a building with a shell already intact even if you cut out the entire inside and start from scratch it typically is cheaper
then building a building from from scratch and and the Tenant improvements obviously you have to take into consideration.
The supply of available buildings and or land and where it is.
In relation to where you want to be and what that Supply looks like and then figuring out how you know what options are available doing adaptive reuse on retail has been.
[19:26] A trend in healthcare.
That has taken off just because retail typically has the parking has the visibility that a lot of practices are looking for and healthcare companies as you see like a lot of the hospitals have done these urgent care centers right on some Corners just sort of
like a CVS Walgreens plan that helps people just patients have easy access and can find them so.
[19:51] When you’re taking into consideration all those costs if you can find an existing building and just pay for the hard and soft costs of the tenant improvements and then you know if you buy the building buying a building is
typically less than.
[20:05] Building it depending on the court again it’s depending on the market and that’s where you know when the prices of buildings become too high it makes sense to build them from scratch and if the prices of existing buildings are low.
Based on market conditions it’s cheaper to buy an existing building and build it out from there so a lot of it has to do with.
Location market conditions and then the cost associated with with both of those depending on the market well that’s all important things to be considering its a lot there’s a lot that goes into that
in episode 56 we talk to a guy named Steve Anderson who does construction mainly for dental offices but a lot of medical offices to.
So we talked extensively about what goes into building a building so if anybody wants to get more information on that definitely go check out episode 56 it was really really good as well.
[20:55] So okay well let’s let’s kind of get more specific here so now we’ve decided let’s say that we want to buy a place or we want to build a place the.
Classic Axiom in real estate is location location location right it’s most three most important things.
So how do you pick the right location what are some factors that go into that decision.
[21:15] Well the first thing I would say is that I’m hoping that every practice you know with all of the patient data that they’re looking at they do have some sort of idea of where their patients are coming from and I know
it’s kind of a between where the patients are coming from and then where you want to also as a physician where you want to commute to and I think that there’s a balance for example when I I’ve had some
conversations with Physicians that have a lot of workers comp patients so.
[21:45] That is they need to be in more of a blue-collar area but they themselves live someplace else so there’s like a happy medium where they can
they have a geographic Target Zone in order to be able to make it easy for their patients to get to them but then also you know it’s not
too far of a drive for.
For them on a day-to-day basis so a lot of it I would say the first thing you need to do is find out where your patients are coming from and then where you are driving to what is your daily route and then you know kind of find some target areas to consider from there
there’s some practices also that need to be a certain distance from the hospital they need to be across from the hospital that obviously has to
to be taken into consideration as well but typically I would say outpatient you should
my common sense says find out where your patients are and see see how you can make it easy for them
well that’s really a logical definitely makes a lot of sense it also I think there’s something to the notion of
finding out where the city is going and so to that end going down to your city planners office City manager’s office what’s the overall plan for the city and so if you build a location that’s on the
say the south end of town but the entire expansion plan is northward
then in five years or ten years you’re going to be at The Fringe of where your where your primary patient base is going to be and so starting to think ahead of those kinds of things is going to be important.
[23:14] Absolutely well how do we start to incorporate that kind of long-term strategic thinking into the buying decision or into the building decision because we don’t want to.
[23:22] Move seven times over the course of 20 years right it is a it’s a humongous hassle be.
It’s expensive right it’s a lot more expensive to buy a new place or build a new place that it is just maintain the place that you have so ideally.
[23:38] If you’re going to build a place or buy a place you want to have some place that you’re going to stay for a long time 10 years 20 years maybe longer in some cases.
And you know not every place is going to be your Forever location necessarily but definitely want to think far enough ahead that you’re making some strategic moves.
Towards ability to expand
you know being in the right location that kind of thing how do we start to incorporate that long-term thinking what are some of those factors that we need to be considering on a 5 and 10 and 20 year time Horizon
so if you are in a lease that you have three years or less on I would say you want to start thinking now what you want to do
then the high level is give yourself enough Runway to make these decisions because one it will cost you less in the long-term to you have more
time to do due diligence you have more time to interview vendors you have more time to consider different options and then make the best decisions ahead of you so
I used to do a lot of Leasing and you know these Physicians are like yeah I have 30 I’ve got a 30 day notice from my landlord I need to find a place you’re like oh my gosh I mean just a bill that just a few
find I mean getting a lease and doing a build out that is a six to eight-month process and the six-month process being on the on the low end if your
it’s because you have to find the place you have to get a lease you have to negotiate the lease and then you have to do the build-out and depending if you need permits and stuff like that and when your.
[25:04] Considering buying a place that’s even.
I think you need you need a lot more Runway you need time to obviously find a deal negotiated deal not be pressured I mean the
the worst thing in real estate is to be in a position of negotiating without any other options just because you don’t know until you get into negotiations how it’s going to go you don’t after an inspection of a building there might just be too much that you don’t want to
you know thirst cracks in the concrete and the person you’re buying it from doesn’t necessarily want to repair it those are things you just don’t want to be left
Other options and forced to have to only make a decision on the option in front of you so I personally like to have.
[25:52] Options for my clients to consider and maybe they’re not all the all the same there can be an Adaptive reuse option there can be you know a piece of land that you would buy and build and then you know and a third option and
really sort of analyze one the cost associated with it and how it’s going to fit into their long-term plan so when your
getting towards 3 years or less on your lease or if you’re in a lease.
That’s when I would start thinking about it if you’re in a building and you are looking to get another building I would just say make sure that you give yourself like a three-year buffer before you start
kiddo telling your patient you’re going to have another building closer to where they live just so that you.
Give yourself the time to find the right place and have some options to consider.
[26:42] Nice I think that’s really really smart advice okay so let’s talk a little bit about the upside to owning and buying your place I mean there’s
obviously the something to be said for the fact that you can just.
Design and how you want you can make it out how you want to a certain extent depending on if you’re buying or building but let’s talk about the financial upside to it so what kinds of returns
should we be able to reasonably expect from a piece of real estate that we own
so it all depends on how you buy it but typically you can see irr returns of 16 percent but that’s a range so you know I don’t want everyone to because it can go anywhere from 8 percent to sometimes 23 but.
[27:22] You know typically a good real estate investment has an irr that’s around 15 16 percent it’s an internal rate of return which that’s a whole other that’ll take a whole other episode to explain.
[27:34] But there is a ton of upside to having Equity you can also
continue to recapitalize it and refinance and pay down your loan or or things like that and then you know when you are
done practicing you know at this point I would say you have a you have a network or maybe even you’ve hired some younger Physicians and you can.
[27:57] Somehow you know depending on your succession plan
if it’s an internal succession plan you can sort of get out of the operational part of the business but still own the real estate as an option and have cash flow.
If you do end up at the end of practicing you could probably find another Medical Group to take over.
The building and you can then then you can either sell the building with the lease
to an investor or you as the investor can keep it so I think it gives you a lot of options for future cash flow and return on
nice yeah the internal rate of return is certainly a complex process but yeah so the the overall returns of.
Yeah 06:16 23% I mean that’s that’s got to get people excited I would think so that’s that’s really good to hear so how do we then
position ourselves to take advantage of that higher irr so because.
[28:56] You know we want to get that eight percent return a lot of the money is made when we buy it and we are hopefully getting a good deal.
But a lot of the money is going to be made for selling it for top dollar and so how do we.
Position that medical space to be have maximum attractiveness so we shoot for that 1620 23 percent level of that range.
So the first thing is you need to maintain keep the property and in good condition you don’t want to neglect it and then have 20 years of.
[29:27] Deferred maintenance that then ends up being incredibly expensive and either you pay for it or.
The you discount the price when you’re trying to sell it selling it with a lease in place to either an into an investor is
where you can I think you can get the highest and best and you from an income standpoint the leash should be market rate and with star closet you always have to be at market rate anyway but you need to be
at market rate and you need to have I would say oh very well managed building the operating expenses can
kill you so I would make sure that you you know
HV AC is a huge like Electric utilities they are huge property taxes.
You know you know what your property taxes are in your municipality you know making sure they’re paid is one thing what they are is a cost but it’s
that’s a cost that’s associated with the market and it’s known you know having competitively-priced building Insurance you know then.
As far as your vendors I mean you should every year or every couple years really do a review of your vendor costs and make sure that they’re still competitive and then
you know obviously if they’re not performing well.
[30:42] Get up make a change but really managing your building from an expenses standpoint because the lower the expenses the higher the value so there’s a balance between making sure that it’s well maintained
but that you’re not overspending with when it comes to expenses.
Right now that makes sense okay so let’s think about the timing of it then so so obviously if we’re planning on moving out of our current space and into a new space
then the time the cells whenever we’re ready to move out and that makes sense but I’ve definitely talked to a lot of folks and certainly we’ve done this in our group where are you
you build a building for say an office building or a surgery center or an infusion center or for whatever the purpose is
and you own it for some period of time the value of the asset hopefully appreciates and then you sell it and then lease the space back from the company you’re selling it to so you basically
get this big pay off hopefully of having sold the place but you remain in the same location just as a
rents are instead of as an owner when is it time to make that move where we transition from owner to renter but in the same
if you’re talking to one of the investors that would buy this they would say well we want 12 to 15 years of a lease term you really need just 10 and sometimes 5 but.
[32:04] For the ones that know what they’re doing and will likely over the long-term be a better match I would say if when you’re looking at your next 10 years and say you have several buildings and you have different partners that own
different pieces of each building and it just like that sort of it might just be easier to say hey why don’t we do a sale-leaseback now
or well there’s two reasons to do a cell leaseback one to get the equity out now so everyone you’re just you put them up for sale you put ten year leases on them there’s investors that will buy them if they’re in good can good
physical condition you as a practice are financially healthy that’s when you can compress the cap rates and get
incredably top dollar because you’re selling it with the lease in place the other reason is if your practice and you’re like we need to expand but
you know for whatever reason you don’t want to use other capital resources its
almost a way to self-fund ear expansion because again you can get the equity out of your buildings in the same structure and then use those to maybe you want to buy maybe of three buildings that you want to do this to you so that you can expand with three other buildings so there’s a lot of different
ways to use a sale-leaseback but it is the way to get a lot of your Equity now a lot of practices like it when they’re.
[33:27] Say at the end of 10 years I like you know I don’t want to deal with finding another tenant and I don’t want to manage the building so I don’t want to deal I just don’t I want to be done with it and I want to move on and some people.
[33:40] Attractive to them so they say Hey you know in 10 years when I’m done practicing.
I want to be out and it’s kind of the same scenario as you know maybe you have different.
Partners in vet because there’s the LLC of the building and then there’s the operating company which is the practice so
there might be different investors and the LLC of the building then there are Physicians practicing in the practice and
if there’s for some reason if the LLC is like you know what we don’t want to deal with
figuring out what we want to do with this building sometimes they want to sell it to because they’re going to be getting bought by a hospital well that’s a win-win when an investor gets hospital grade
hospital grade tenant to but they don’t at the end of the day they just want to be employed Physicians and be done with the real estate so it’s a tool it’s a definite tool I would say you need to use it for.
[34:32] Specific use I mean you have to have
you have the end goal in mind when you’re doing it to structure it properly gotcha that’s that’s a good advice there so when we’re thinking about owning a piece of property how do we structure the legal ownership do we need to
do we own it personally do we own it through the business-to-business own it should we separate the business and the real estate and have like a separate LLC that owns just the real estate.
Separate from the business what’s your recommendation for that.
So I’m going to first qualify this answer with I’m not an attorney or an accountant and I do recommend that your real estate decision is aligned with the advice of those two functions typically what I see is that.
[35:17] The real estate the piece of real estate is owned in an LLC.
Regardless of if it’s the same Physicians that practice in the in the operation or not but that it is in an LLC just for liability reasons and then
all of the real estate for you know the the rent is collected through the LLC and the expenses are paid through the LLC so it does serve an entirely different function
and then you know the operating practice its own however it makes sense for for the providers
in the operating practice but they are typically different but that allows is that they’re two separate business functions and the real estate
you could make decisions on the real estate independent of the practice so that’s what I typically see and that.
[36:03] Typically here attorneys recommending to their clients.
[36:08] Well certainly cleaner that way and easier to make some separations if you you know if you’re thinking of them as separate and identities especially if you want to start to sell trying to figure out how to disentangle the real estate portion from the business portion
could get very tricky very quickly I could imagine well yeah I mean if you have if you’re a large practice and you’ve got 20 partners
you know that’s that’s tough to get any sort of consensus for Real Estate decision and not everybody wants to.
[36:39] Be a part of the real estate either so I think it also offers some flexibility to say hey if you want to invest in the real estate and we divided into units however your practice wants to divide those you know based on seniority or based on whatever
or equal you know it just allows for some different options
nice if people are looking for a healthcare real estate advisor someone to really walk them through this
kind of thing what would be some questions that we should ask or some things we should look out for maybe some red flags to help us figure out who’s the right person to ask is just like with any physician
you’ve got a lot of different options right and so and there’s going to be varying levels of excellence in any industry so how do we pick the right person.
[37:25] To advise us through this process so the first question I would ask is have they ever done a medical deal before and what was it you know in real estate
just I mean like you had mentioned in our episode I think it gets commoditized or everyone’s like well you know what my sister has a realist residential real estate license so she can go and you know she can technically transact a commercial
property and I’ve recently had this experience they made a change because they had it was more of a family and friends
the the realtor was a residential agent and didn’t have you know she wasn’t tuned in there’s a there’s a lot of some off-market stuff that
the that we know different you know a little movement and practices that may be coming up you know I get calls at say Hey you know this is an official but I want to give you a heads up if you can find someone to take over this I would be interested
[38:18] You know they don’t necessarily want to Market it for whatever reason in the open market but they do you know want people to be aware of it so those things happen plus I would say you
you want the mean so if they’ve done it before you want them to know the market and in commercial real estate medical office
it’s in a lot of firms falls under office but it really isn’t there’s a whole different set of research there’s obviously different players it’s more fine-tuned than that so if they if they don’t they’re not in tune with the market
conditions of medical office in their Market you could get into a stressful situation and there’s certain landlords like there’s a lot of properties that the landlord’s they Market as office and medical
that are not MediCal at all and some.
[39:09] Medical group’s may go in there but I if they do I guarantee that they’re paying a lot of their own tenant improvements out of their pocket because different
if it is a true medical office building while they your will have to pay higher rents the ti package of significant versus going into a building that is owned by an office.
[39:29] Owner that has only under written you know parpan paint or ten to Fifteen dollars and tenant improvements you know because as a healthcare company and Medical Practice
you’re not necessarily wanting to use all of your operating capital
on building out your space you actually want it for your business so it’s a different animal and there’s investors and landlords and Architects and a whole host of.
[39:55] People that do
focus on medical office and if there isn’t one in your Market you can get an architect that isn’t necessarily in your Market contractors I would say you do but there is a network of
contractors that specialize in medical office that
could likely give a good referral so there’s different ways to make it happen so that you have the proper advisors and because at the end of the day that mistakes
will cost you and not anybody else to pay for those yeah and we’re talking about in a lot of cases probably in
nearly all cases a middle to large six-figure asset that we’re talking about dealing with and so
you know going cheap on the person who gives us the best advice and coaches us through this process seems to be a hazardous approach to me because
if you’re not getting you know you’re not getting the right advice then it could cost you
five times what it costs to pay the right person right yeah absolutely absolutely I mean and you know when you go even throughout the whole lifecycle me when you’re buying it but the one in here selling it to I mean I have.
[41:01] Buyers that this is all they do and they can analyze a medical office property and they can understand the tenant mix even if they don’t understand the specific.
[41:11] Ten itself you know depending on the specialty and they know what they’re doing and at the end of the day they’ll also be a good owner so especially in like a sale-leaseback you want to make sure whoever is buying your
building understands that your
Healthcare practice and there’s some nuances into that you know you have to have some good communication I mean your tenants they are.
They’re hard-working they’re Highly Educated they’re financially strong you want to be the partner that the best situation is when
say they want to be a partner I’m sure that you yourself you know when a landlord just sends a letter like
that they’re going to be doing some just as an example hey we need to do like maintenance on the hvdc systems like when you’re when you’re managing when you’re when you have a medical tenant in there you kind of want to say hey when would be the best time we have to do this hvc maintenance but when would be the best time for your practice.
Likely not on a Wednesday at 2 p.m. but maybe right after day you know and you know
maybe Saturday morning would be better you know I mean so just things like that that you know you have to take into consideration.
[42:16] Nice well treasure this has been very very helpful and I know there’s a lot of people out there listening that are.
Really going to get a lot out of this because this is absolutely something that everybody thinks about it some point.
During their private practice Journey so thank you so much for coming on if people want to connect to you when I get connected to the podcast you know more of your content want to learn more from you
continue the conversation how can people do that.
Absolutely so my website its doc properties docprops/core.xml you can get to the podcast from there which has both Physicians and investors that specialize in this asset class where you can get some information and then the best way to get ahold of me is through email and my email is t Talbot
ta LL B OT at Doc properties
dot-com and happy to brainstorm with anyone that’s looking at has some questions to ask I try to be super helpful.
Awesome well this has been great we’ll make sure to include all of your links in the show notes and in the podcast description so that people can get a hold of you and get more content from you well that was Trisha Talbot founder of Doc properties make sure you connect with her
learn more listen to that podcast it’s got great stuff on there.
And yeah just continue that conversation Trisha thanks so much for coming on the scope of practice podcast today I really appreciate it thank you.
[43:42] The two best things you can invest in our a business that you own and work in or real estate and we talked about both today
and I really hope this was a helpful conversation you know at some point if you’re a business owner you’re going to want to consider owning the building you’re working in I think this is a great foundation for anyone looking to build up their business by investing in real estate.
[44:03] For today’s free resource I’ve got a great new guide call the conference attendance checklist as 2021 winds to a close a lot of the national medical societies are getting back to live in-person conferences if you haven’t been to a live conference in a while
you didn’t this guy even if you’re going to go to a virtual conference at some point
download this free resource conferences offer incredible opportunities and a little preparation ahead of time can really help you make the most of the experience just go to www.desktoplearn.com conference checklist or
click the link in the podcast description to download it for free thanks so much for joining me on the scope of practice podcast today
you can also find all those resources in the show notes at www.the scope of practice.com / episode 86 that’s www.the scope of practice.com episode 86 or just click the links in the podcast description
thanks so much for joining me and I’ll see you next time.
[45:02] Thanks for listening to the scope of practice podcast at www.viki scope of practice Dot.