Entrepreneur | Part 3 – Real Estate Terms With Michael Burer

Audio Transcription

Get ready to enter the Thrivetime Show! We started from the bottom, now we’re here. We started from the bottom and we’ll show you how to get here. We started from the bottom, now we’re here. We started from the bottom, now we’re here. We started from the bottom, now we’re on the top. Teaching you the systems to get what we got. Cullen Dixon’s on the hooks, I’ve written the books. He’s bringing some wisdom and the good looks. As the father of five, that’s where I’mma dive. So if you see my wife and kids, please tell them hi. It’s C and Z up on your radio. And now, three, two, one, here we go. We started from the bottom, now we’re here. Started from the bottom, and that’s what we’re about to do. real estate topic to obscure Burer off the sunny coast of San Diego, California. And we are talking about this topic that’s near and dear to my heart. It is the cost of occupancy. Now I’m going to read the definition and he’s going to tell you what it means. So here we go. Expenditures that are required to assume and maintain occupancy of a space. Such expenditures include rent or mortgage payments and reoccurring costs such as real estate taxes, repairs, operating expenses, and other outgoings directly resulting from the use of the property. What is the cost of occupancy? What does that mean? So as a tenant this is what you really want to know when you’re evaluating whether you rent the space or not. What is it going to cost me to be in this building? It may not be just your rent but it could also include electricity, cam charges that the landlord would charge you. So in some buildings the tenant may be responsible for that. In other buildings, the landlord may be responsible for these costs. So it’s important to understand when you compare locations, what is my total occupancy cost? What’s the total cost to be in the space? This is something I think a lot of business owners get in trouble with because they don’t actually think about the true costs. They’re thinking about just, well, what’s the blue sky cost? Oh, it looks like it’s going to be very little. They don’t think about all the things that could add up. What are some ways where you see business owners or people who lease space where they sometimes forget to add in certain costs? So they may not factor in you know, cam charges that may come at the end of the year. Common area maintenance charges. They may not include electricity would be a common one. The cost to clean the space or repairs and maintenance that may be under your lease. You’re responsible for HVAC replacements, air conditioning replacements, those can add up. So it’s important to factor all of that in when you’re evaluating a lease. I realize that I haven’t been outside in about a year, so I can’t open my eyes. And I apologize, I can still see you. But even though I can’t see as well because I’m kind of squinting a little bit, I do sense your appreciation of this moment. I can sense that you can even feel my sense of appreciation for you at this very moment I feel it. Like a petting zoo. Alright Thrivers, today we are joined with Michael there’s no real estate topic to obscure Bjerke we’re talking about a topic that I know that you’re thinking about you’re thinking about thinking about it if you haven’t thought about it this is debt coverage ratio otherwise known as DCR if you didn’t know. Some people, they call it that. I don’t, because I’ve never got familiar with these terms. But here we go. I’m gonna read the definition. And the CFO of this billion dollar real estate company is gonna explain to us what it actually means in layman’s terms that my mind can handle. So here we go. This is the ratio of net operating income to annual debt service expressed as net operating income divided by annual debt service. A lot of stuff going on there. What does this mean? Debt coverage ratio, or sometimes debt service coverage ratio, is a percentage that indicates whether the profits from the business or the real estate investment are covering the cost of the debt. So at a 1-0 DSCR, at a 1-0 debt service coverage ratio, your revenue less your expenses equals your debt. So you want the ratio to be above 1-0. That indicates that you’re covering all of your debt payments. When does this stuff get talked about? How often is this talked about in your world? So when you go in to get a loan, your banker or the person who’s evaluating you for the loan is going to compare that to the monthly payments on the debt to determine how successful you’re going to be at repaying them. Michael, what are some ways that maybe someone can misunderstand this? Or can you just maybe add a little extra layer of clarity about what this means and why it’s important for people to know this? This is just a ratio that you’re going to hear bandied about, but it’s really you know, how well can the property cover the debt? Is it going to be successful at repaying the loan? And if there’s a lot of, you’ll hear a lot of coverage, there’s a lot of coverage on that loan, meaning there’s a lot of income in excess of those monthly payments. Okay. Now, Michael, I want you to know I struggle sometimes to show my appreciation, but not today. Objection! Wow. I went to the highest levels of government. Now, I’ve never got a response, but I believe their non-response is, in fact, this ruling. Thank you for being here. Boom. Boom. All right, we’re live here in sunny San Diego joined with my main man Michael. There is no real estate topic to obscure Bure and we are talking about depreciation. Now depreciation is a topic that a lot of people ask about. We’ve had a lot of thrivers actually ask, how do you determine your depreciation? What is my depreciation? What does that word even mean? And so we’re going to get into it here. So I’m going to read the definition and then he’s going to provide us with an ample example that my mind can handle so that you and I can understand it better. So here we go. Depreciation. Loss of utility and value of a property. What does this mean? Pretty simple. So it’s the decline in value over time, usually due to either the assets deteriorated or the functionality of it has declined. So if you think of your car, you bought it for a certain price and next year a new model comes out, it’s got new bells and whistles, your car is worth less because there’s newer, more improved product on the market. Often though in real estate, and so it often is involved when you’re talking about your taxes because you can deduct the depreciation in your taxes for real estate investments. So even though for tax purposes you’re marking down the value of the building every year, it could be appreciating in actual terms. The value could be getting worth more even though you’re depreciating it, you’re reducing that cost for tax purposes. Now real estate is one of the only things that I know that you just can bet on it appreciating much more than other assets. I mean, it’s one of those things where, you know, if you buy a building and it’s not in a bad area of town, usually it’ll just appreciate year after year after year? Maybe. Maybe? That’s the hope. It always, a lot of factors. Talk to me from a commercial real estate background perspective why that is just hoo-ha. Why you can’t just say that. Every asset class can go up and down over time. A lot of factors. Have you seen a major, major building just drop in value, depreciate radically? Have you seen this happen? Sure. The market value absolutely changed dramatically. Walk me through what kind of things could affect that. Or maybe an example you have in your mind. Like what would be an example where a property is pristine, it’s in great shape, it’s still in great shape a year later, but it’s worth 20% less. Well sometimes it’s due to factors unique to the building. So it was occupied, it had 100% occupancy, all the tenants in the building, and the tenants move out, and then it’s worth less. You could have a building that next door maybe an undesirable use is created. So you have a nightclub go in next to an office building, that may make it less desirable. Or it could just be broader factors in the economy that make the real estate worth less. You lived in San Diego right at the recession. Right when the recession was just hammering. Did it affect San Diego’s valuation of properties pretty heavily? Sure. So at the end of the day, an asset is only worth what someone will pay you. Were there buildings that lost half the value in San Diego? Sure, absolutely. Has it rebounded now? Almost? Yeah. Really? But you watched it go all the way, I mean you watched it just free fall. Yep. What does that do in your world when, at that time? Can you walk me through, I mean when you, people who are investing in real estate and they see their assets depreciating, do they kind of know that the real estate cycle is up and down enough to where they’re kind of calm or is it a little bit like, oh no! I mean how does that go? How does it feel? There’s a lot of fear, right? That’s what often creates the decline in value. And there’s this total fear in the market. People don’t want to participate, and less participants usually mean a falling market. OK. OK. Well, Michael, I appreciate you talking about this, this term of depreciation, and really getting into the nuances of it. And I was trying to think of a way, how do I describe how much I appreciate you? How do I do it? You know, I’m like, well, I’ll take an hour or two and come up with something. And so hour two, minute seven, I came up with this. I appreciate you in the same way that chefs appreciate nonstick Teflon pans. Well said. Well said. Boom. Boom. All right, thrivers. Today we are joined with the pleasure of being joined here with Michael. There is no real estate topic too obscure to talk about a topic that you’re passionate about, I’m passionate about. Something we need to know in the world of real estate, it’s discount rate. Now Michael, I’m going to read the definition. I’d like for you to add a little bit of clarity, a little bit of kind of example that the Thrivers can handle, that I can handle really, it’s just for me to handle that so we can make sure we leave here knowing what we need to know. So here we go. Discount rate. The percentage rate at which money or cash flows are discounted. The discount rate reflects both the market risk rate of interest and a risk premium. So Michael, in terms of, you know, layman’s terms, I mean, you are a CFO, you deal with, you know, you deal with real estate every day. When would we even talk about discount rate? And what does it really mean? So, when you’re evaluating a future stream of cash, a future cash flow, and you wanted to bring it back to the present to determine what it’s worth, what its value is, you’d use a discount rate to compare it to dollars today. So future dollars compared back to today. So if I’m thinking about buying a building, walk me through when I would use this. I just want to grasp it. So you would look at the projections for this building and say, this building is going to pay me, you know, $100,000 per year for the next 10 years. So what is that building worth today? You would discount that back and to get to a present value of what that income stream is worth today. Now, I don’t know how to say this any other way, and so I wrote it down and I crossed it out and I edited it. I wrote it down again and I really got very complicated. But I wanted to share my appreciation for you in a way that I thought was… I didn’t want to discount it too much. You know, I didn’t want the discount rate to be too strong, too high, too low, too… I just wanted to be accurate. So here we go. Alright. I appreciate you being here to talk about discount rates so much that it feels almost spiritual. Boom. Alright, we are here in sunny San Diego with Michael, there is no real estate topic, to obscure Burer, to talk about a topic that I’m passionate about, that you’re passionate about, that San Diego’s passionate, that America’s passionate about, that other countries are passionate about, other planets are passionate about, other galaxies are passionate about. It is due diligence. You hear this term thrown around, they say, yeah, do your due diligence. You’d better do your due diligence. What does that mean though? I’m going to read the definition and he’s going to explain to us what it means in kind of layman’s terms that my third-grade mind can handle. So here we go. Due diligence. The process of examining a property, related documents and procedures conducted by or for the potential lender or purchaser to reduce risk. Applying a consistent standard of inspection and investigation, one can determine if the actual conditions do or do not reflect the information as represented. What? What does that mean, my friend? So when you’re evaluating an investment opportunity, this would be all the work you would do to determine if it’s measuring up to what you expected. So for example, if you’re buying an office building, you would look at review all the leases, you would read them, you may interview the tenants to make sure that the tenants are actually happy with the building and want to be there. You would review the expenses and make sure that the expenses are accurate for that type of a building. You would inspect the physical property and determine if it’s in good condition. What kind of things do you find when doing due diligence where, you know, let’s say you have an agreement, you haven’t signed anything yet, but you have an offer and you’re thinking about buying somebody’s building. And then you’re doing your due diligence and you find, uh-oh, what kind of stuff do you find in there where you go, uh-oh? Well you may have a seller who says, look at this beautiful building, the broker’s telling you how wonderful this building is, there’s beautiful pictures of it in the offering memorandum. But you get in there and start looking up close and the air conditioning system’s shot. The roof could be bad. Maybe all the tenants that you were counting on are having financial troubles and may stop paying their rent. Those are things you would be examining and considering as you do your due diligence. How much of your time is spent in a deal? Say you have a deal. And let’s say you’re going to spend 100 hours total. I’m just making up the number. But if you’re going to spend 100 hours on the deal total, how much of that time is spent doing due diligence? The bulk of it. That’s the key. Really? Knowing what you’re buying. Really? Now, I’ve heard it said over and over by real estate investment gurus, you make your money when you buy, and you need to do your due diligence to figure out if it’s a good deal. So you’re talking, I mean, the majority of the time is spent doing due diligence. Absolutely. And it’s not just bad things you’re looking for. Sometimes it’s upside or positive things that maybe other buyers don’t recognize. I was doing some due diligence and preparing to share how much I appreciate you being here. And I came up with this little ditty, if you will. I wrote this down last night, and I wrote it off a pen, and I want to read it to you here. Good penmanship by my use as well. Even the longest of words couldn’t explain the entirety of the appreciation I have for you discussing due diligence with us today. I’m touched. Did that feel like a lyrical miracle? It is. Boom. Boom. All right, Thrive Nation, we are gathered here off the coast of, we’re just barely, I mean, we’re almost in the water here in beautiful San Diego at the Hotel Del, where you can smell the ocean, ocean sea breeze here. And we have chosen to talk with our main man, Michael. There is no real estate topic to obscure Burer about the topic of efficiency in the context of real estate. I’m going to read the definition and he’s going to provide you an ample example as to what it means, you know, as you get into the game of real estate. So here we go. Efficiency, a measure of the capacity or effectiveness of space to produce the desired results with a minimum expenditure of time, money, energy, and materials. What does that mean? So basically, it means how does the space lay out for your intended use? If you’re in an industrial building, in a manufacturing plant, and you have these big machines, but the building has huge columns that come down, and so you have to have the equipment spread out, that wouldn’t be very efficient. Or in an office use, if the layout of the building’s up, maybe it’s a triangle, something unusual, and you can’t make, you can get less offices in that size space than you could if it was a rectangle. That would be less efficient in that scenario. How effective do you think most business owners are at being efficient with their space leasing? I see it all the time where I’ll work with a small business and they’re paying $4,000 a month for a space and you look at it and it’s empty or it’s full in one area but not utilized over here. And you’re thinking, there’s got to have been a better space for you or whatever. Do you feel like there’s enough due diligence or enough effort put into finding the most efficient space possible? Yeah, so for a tenant on the front end, really evaluating how much space do they really need, how can they manage their workflow so that they can reduce the amount of square footage can result in a big savings for them over the period of that lease. Efficiency is a key factor in determining where to lease. As a CFO of a billion-dollar real estate company, do you spend a lot of time thinking about the efficiency or looking at the efficiency of a property before you decide if that’s the right one for you? Yeah, well as we evaluate buying buildings, that’s definitely something we would consider. Our building, how efficient is it versus the competitive set? Have you ever thought about arranging your office in a bunk bed style so that way you can be more efficient and you could work up here and the other guy could work here. Like a submarine. Like a submarine. These are the ideas I have. I just do on them. I wanted to share this with you. If I don’t give a little disclaimer to this, it might come across the wrong way. So I’m just going to tell you, I’m sorry in advance. I want to thank you for being here and I appreciate you almost as much as I appreciate myself. That’s a lot. All right Thrive Nation, we are talking about expense stop here with Michael. There is no real estate topic to obscure Bure, off the sunny coast of San Diego, where you could go out there in the beach right now and see seals. You could go out there and you know go see what whales. You could you could just you could be on the beach, you could make sand castles. There’s a lot of stuff you could be doing, but instead he has chosen to be here, we have chosen to be here to talk about expense stop. So stop, pay attention, I’m going to read the definition to you. Here we go. The level up to which the landlord will pay certain operating expenses. The amounts above the stop are responsible, or the responsibility of the tenant. Give me an ample example. What are we talking about here? So expense stop, or sometimes it’s called a base year stop. Oh, base. There’s different types of leases. You could have a gross lease or a triple net lease. Let me get these down real quick. I want our program observers to jot these down. One is the gross lease. Right, so gross lease means that the landlord is paying all the costs, the operating costs to run the building, versus a triple net lease where the tenant would be paying the costs of operating the building. Are these the top two most popular? Yeah, these are the two extremes. The gross lease and there’s a triple net. Triple net lease. Triple net. Who’s paying for everything? The tenants. The tenants paying. If you’re paying for a triple net lease, you’re paying for all the expenses. All the costs. Gross, what’s going on there? The landlord is paying all those costs. Okay, awesome. Everything there. So a base stop basically means that a landlord is saying, I’m going to pay the expenses up to a certain point, but if they increase beyond that, the tenant’s going to pay it. Oh, hoo, just kind of making a bet there. You’re making a bet on who has the risk of increasing the cost. Rolling the dice, getting crazy. OK, now let me ask you this. In your properties that you guys have, do you have, is this common to put expense stops or base stops in your leases or no? Or is this common? So it depends on the market you’re in. But in office leases, you typically find this. So basically, in the first year of the lease, you would establish that base year, that base stop amount based on the expenses. And that’s common in an office type lease. And if the expenses increase beyond that in subsequent years, the tenants would pay that share. Where would you not put this? What kind of lease would you not put it? What kind of lease? You said in some it’s very common, in some it’s not. What’s an example where you wouldn’t include it? It depends on the market again, but a lot of industrial leases are typically gross leases most often, where the landlord’s paying everything, versus in retail a lot of those are triple net, meaning that the tenant is paying all the costs, but there are exceptions. I sometimes, on the team, sometimes I ask, I say, guys I want to make sure that, you know, Michael Beer feels appreciated and I can communicate to him how I feel with appreciation and a lot of times it’s a team effort. Sometimes I my well runs dry and I… You’re speechless? I don’t believe that. You know the Boyz II Men song, you can’t wait till the water runs dry, let’s not wait. That’s what I did. I was like I’m not dry yet but let’s go ahead and have somebody else come out and help. And so we had a tall guy, he’s about six foot eight of great, really he’s serious, he’s six foot eight and he wrote this for you. Okay, Michael. I want you to know that I seriously appreciate you being here But still I ridiculously admire the Keebler elves I don’t even know what that means so that’s why we don’t let other people write stuff very much. I’d agree All right thrive nation we are joined here in sunny San Diego today with Michael. There is no real estate term to obscure Bure. Airplanes are in the background. If you look closely in the ocean, you’ll be able to see there’s some ocean life out there. There’s the beach. And we’re at the Hotel Del, where you can just smell the ocean. It’s beautiful. And we’re choosing, though, not to go out there and suntan. We’re choosing to be right here with you, talking about real estate terms that you need to know. And this term we’re going to talk about today is financial leverage. I’m going to read the actual definition. He’s going to explain to you what it means in layman’s terms so that a layman like myself can learn it. So here we go. Financial leverage. A layman? A layman like I… I… Now, when you get humor from mentors, it throws me off my game. So I’m going to try to get it back together. I feel like I pulled a hammy. I probably just misheard you. I’m sorry. I feel like I pulled a hammy when you mentioned that. Yes, no, I’m not a lame man. So, I’m going to read the term here, try to collect myself emotionally. The use of borrowed funds to acquire an investment. We’re talking, the use of borrowed funds to acquire an investment. What does that mean? It means debt. Debt. So you’re buying a building with debt. Did you say you’re dead? No. Debt. Debt. So basically, you’re using other people’s money, and that is a tool that is allowing you to take maybe your more limited resources and buy a larger building, a larger investment, and that is considered or is called leverage. Financial leverage, in this case. And many people find it funny. You have complete mastery. I’m like a puppet and you have mental mastery. You broke my frame and now I must continue. So let me ask you, when you’re talking about financial leverage and debt, how do you have any idea how much debt’s appropriate, how much is not appropriate? Because you hear a lot of people talk about well that’s good debt, that’s bad debt, some people say all debt’s bad. How do you know what the appropriate amount of financial leverage or debt is for you and your financial goals? So it all depends, but debt is a tool and it’s not good or bad, but it’s going to magnify whatever’s happening at the property. So debt increases the amount of risk in a project because you need less variability to wipe out your initial investments. So if you bought a building for $100 and you get a loan for $80, you put $20 into it, $20 of cash. If it goes down 20%, it goes down to $80, your investment is wiped out. Let me ask you this though, have you ever seen somebody make billions of dollars in real estate without borrowing money? No. The reason why I’m asking is because a lot of people want to get into real estate but they want to do it with just cash. I mean if you’re going to get into real estate you’re going to have to eventually borrow money, right? Yeah, you’re using debt as a tool in appropriate circumstances to leverage your cash, your investment. Is that hard for a lot of people to grasp when you’re talking to people who aren’t involved in real estate and they realize how much money is being borrowed. Does that overwhelm people? I think it could be scary to some folks but it can be an appropriate tool. We don’t know the exact numbers but like a guy like Donald Trump for instance. He’s famous for buying all these buildings and stuff but he’s borrowing a lot of money too to do these things, right? Ultimately the goal would be to what? To leverage yourself to… what’s sort of a ratio you want to get to? Is there any way you can say like if I’m gonna try to build a billion-dollar real estate empire. If I’m watching this and I own two houses and I want to try to flip another, flip another, and then start buying buildings, is there some kind of ratio I want to stick with then or what? Again, it all depends on what your risk profile or risk tolerance is. Some people try to effectively borrow all the money to invest in a venture. But typically in a commercial deal, your leverage levels could be anywhere from 50 to 70, 75 percent. Okay, so let’s talk about what that means. If I am buying a building that’s $100 million, and you’re saying it’s 70, 75 percent, does that mean if I put in $10 that I could effectively borrow, or if I put in $10 million, I could effectively borrow $70 million? What does that mean, that 75 percent? What does that mean? So, if you have a $100 million deal, and you’re going to get 75% leverage, you’re putting $25 million in of your own money, and then you’re using leverage or debt for the balance, the other $75 million. Okay, that’s pretty typical for commercial real estate. It’s about 70%? Yeah, 60 to 70 would be on the higher end, but again, it all depends on where you are in the cycle of the market and the markets? Michael, sometimes on Thrive here, you get to a point, you get to a dark period, almost, as a host, where you’re going, I don’t know, making people laugh on a consistent basis, it’s a burden. It’s weird because the paradox is that people laugh, and I’m secretly just sort of crying, trying to think of what is funny, get to the root of that so sometimes I bring other people in people and in this particular time I brought in a tall man he’s about six foot eight of great he’s he’s awesome he’s name I shall not mention because I don’t want to give him any credit you know what I mean I want to make sure he doesn’t get any credit but he wrote this for me he wrote this for me to say to you to express my appreciation. Let’s hear it. I appreciate you like the proud American you are because of your lasso skills. Is that even true? Really? Never lassoed. Okay well sorry I’ll just give you kind of I’ll give you a boom but just kind of a boom! All right Team America and Thrivers Worldwide we are here today to talk about a little topic that’s near and dear to my heart. A topic that I think is near to your heart. It’s called fixed expenses. And we’re joined here today with Michael. There is no real estate term to obscure Burer to help us bring some clarity and some definition to what this term means and how it relates to you and your business. So the term is fixed expenses. Fixed expenses. I’m going to read off the definition. It’s really easy for me to say it, so I’m going to try again the third time. Fixed expenses. Wow. Here we go. So costs that do not change with a building’s occupancy rate. They include property taxes, insurance, and some forms of building maintenance. Outside of just watching me struggle as I pronounce a word, what are we talking about here? There’s two broad categories of expenses. You have fixed expenses and variable expenses. Fixed expenses don’t change based on the building’s occupancy. So the cost to maintain the landscaping outside the building doesn’t depend or isn’t affected by the building being 100% occupied or zero. Versus electricity cost would be very affected by the occupancy. More people in the building using the air conditioning, the lights, that would be a variable expense that will go up and down. So as you’re a CFO and you’re sitting there in your job, you know, trying to figure out what the costs are gonna be, you really have to be aware of what the fixed expenses are and you probably have to start to look for things that we are calling a fixed expense that really aren’t a fixed expense. That can be kind of dangerous. If you think something’s a fixed expense, if you’re budgeting electricity, for instance, as a fixed expense, and you really it’s not. I mean, what are the things where people with the average person, business owner, thinks something is a fixed expense but it’s really not? Well, janitorial, it would not be a fixed expense. That would depend on the building occupancy. The more use of the building, that’s going to be a factor. Air conditioning, in some ways, could be. The more you have to run the air conditioning, the wear and tear on the building, that would be more of a variable than fixed in some respects. So a lot of different expenses could be. But if you’re watching this right now, and you’re a thriver, and you’re kind of trying to make your annual budget, just be really, you want to sit down with an accountant or maybe a financial planner or someone that can help you with this kind of things. But you really want to ask the hard question, is this a fixed expense, or is this actually a variable cost? And you need to know that so you can budget for it, right? That’s right. Now, Michael, I recently in the last couple hours, I’ve been delegating some writing, you know, because I mentally am having a breakdown. I’m surrounded by so much awesomeness. There’s birds everywhere. There’s the ocean. It’s just a beautiful environment. And I’m like, how am I even going to come up with, how am I even going to focus long enough to adequately write something that would describe how much I appreciate you being here. So I delegated this to a man, he wrote this for me. I’m going to read this. So a man wrote this for me to read to you. Let’s hear it. I appreciate the gracious gift of information that you keep on giving about fixed expenses. Isn’t that almost poetic? Beautiful. It just, it flowed right off my tongue, unlike the word itself. Give me some here. Boom! All right, my name is Clay Clark. I’m joined here today with Michael. There is no real estate topic too obscure. And we are talking about a term that if you’re not careful, it’ll get you emotional. It’s called gross lease. I’m going to read the definition and he’s going to bring some clarity and an ample example that my mind can handle about what this term actually means. So gross lease, a lease in which all expenses associated with owning and operating the property are paid by the landlord. That doesn’t sound gross, that sounds good. What is a gross lease? Tell me about it. If you’re a tenant, this is a favorable lease. So the risk of inflation or the cost of operating the building are borne by the landlord rather than the tenant. So if electricity goes up in price, if the taxes increase, if the roof needs to be replaced or repaired, all of those things are paid by the landlord. Versus if it was a triple net lease, which is the other kind of extreme example, all of those costs would be borne by a tenant in a triple net lease. Do you feel like it’s reasonable for most business owners to go out there and try to get a gross lease? Is that what they should be doing? Should they be trying to get a gross lease? It all depends on the market. So it’s not something for a landlord or a tenant, probably in most cases, to try to negotiate. You should just know what you’re getting yourself into. Because it really is driven by the market, and usually a certain type of lease in that area. So office buildings in this area will all be gross leases. How common is a gross lease? It depends on the market, again, and the type of building. So an industrial would be very common. In an office setting, a variety of gross leases would be more common, but in retail, triple net would be more common. Why is a gross lease so common here in San Diego? It’s by sector, so in office, it’s just more common. It’s a standard. Across the country? In most markets, but there are markets where office buildings are more triple net. In Southern California, gross leases are typical for office buildings. Michael, I appreciate you a lot. And a lot of times I try to come up with an elaborate way to express that to you. Some people might have seen this in other episodes where I’ve done some pretty sensational ways to appreciate you. And what I want to do, I just want to raise a glass to my appreciation for you. I appreciate that. If you would also cooperate and raise the glass to me. Cheers. Cheers to my appreciation of your unique appreciation of my appreciation for you. Excellent. JT, do you know what time it is? 410. It’s T-Bo time in Tulsa, Roseland, baby. Tim Tebow is coming to Tulsa, Oklahoma June 27th and 28th. We’ve been doing business conferences here since 2005. I’ve been hosting business conferences since 2005. What year were you born? 1995. Dude, I’ve been hosting business conferences since you were 10 years old, but I’ve never had the two-time Heisman Award winning Tim Tebow come present. And a lot of people have followed Tim Tebow’s football career on the field and off the field. And off the field, the guy’s been just as successful as he has been on the field. Now, the big question is, JT, how does he do it? Well, they’re going to have to come and find out, because I don’t know. Well, I’m just saying, Tim Tebow is going to teach us how he organizes his day, how he organizes his life, how he’s proactive with his faith, his family, his finances. He’s going to walk us through his mindset that he brings into the gym, into business. It is going to be a blasty blast in Tulsa, Russia. Also, this is the first Thrive Time Show event that we’ve had, where we’re going to have a man who has built a hundred million dollar net worth. Wow. Who’ll be presenting. Now we’ve had a couple of presenters that have had a billion dollar net worth in some like a real estate sort of things. Yeah. But this is the first time we’ve had a guy who’s built a service business and he’s built over a hundred million dollar net worth in the service business. It’s the yacht driving, multi-state living guru of franchising. Peter Taunton will be in the house. This is the founder of Snap Fitness, the guy behind 9 Round Boxing. He’s going to be here in Tulsa, Russel Oklahoma June 27th and 28th. JT, why should everybody want to hear what Peter Taunton has to say? Oh, because he’s incredible. He’s just a fountain of knowledge. He is awesome. He has inspired me listening to him talk and not only that he also has he practices what he teaches so he’s a real teacher he’s not a fake teacher like business school teachers so you gotta come learn from him. Also let me tell you this folks I don’t get this wrong because if I get it wrong someone’s gonna say you screwed that up buddy so Michael Levine this is Michael Levine he’s gonna be coming you say who is Michael Levine I don’t get this wrong this is the PR consultant of choice for Michael Jackson, for Prince, for Nike, for Charlton Heston, for Nancy Kerrigan, 34 Grammy Award winners, 43 New York Times bestselling authors he’s represented, including pretty much everybody you know who’s been a super celebrity. This is Michael Levine, a good friend of mine. He’s going to come and talk to you about personal branding and the mindset needed to be super successful. The lineup will continue to grow. We have hit Christian reporting artist Colton Dixon in the house. Now people say, Colton Dixon’s in the house? Yes, Colton Dixon’s in the house. So if you like top 40 Christian music, Colton Dixon’s going to be in the house performing. The lineup will continue to grow each and every day. We’re going to add more and more speakers to this all-star lineup, but I encourage everybody out there today, get those tickets today. Go to thrivetimeshow.com. Again, that’s thrivetimeshow.com. And some people might be saying, well, how do I do it? What do I do? How does it work? You just go to thrivetimeshow.com. Let’s go there now. We’re feeling the flow. We’re going to Thrivetimeshow.com. Thrivetimeshow.com. Again, you just go to Thrivetimeshow.com. You click on the Business Conferences button, and you click on the Request Tickets button right there. The way I do our conferences is we tell people it’s $250 to get a ticket or whatever price that you can afford. And the reason why I do that is I grew up without money. JT, you’re in the process of building a super successful company. Did you start out with a million dollars in the bank account? No, I did not. Nope, did not get any loans, nothing like that. Did not get an inheritance from parents or anything like that. I had to work for it, and I am super grateful I came to a business conference. That’s actually how I met you, met Peter Taunton. I met all these people. So if you’re out there today and you want to come to our workshop, again, you just got to go to thrivetimeshow.com. You might say, well, when’s it going to be? It’s going to be in Tulsa, Russell Oklahoma. I suppose it’s Tulsa, Russell. I’m really trying to rebrand Tulsa as Tulsa, Russell. I’m sort of like the Jerusalem of America. But if you type in Thrive Time Show and Jinx, you can get a sneak peek or a look at our office facility. This is what it looks like. This is where you’re headed. It’s going to be a blasty blast. You can look inside, see the facility. We’re going to have hundreds of entrepreneurs here. It is going to be packed. Now for this particular event, folks, the seating is always limited because my facility isn’t a limitless convention center. You’re coming to my actual home office. And so it’s going to be packed. So when? June 27th to 28th. Who? You! You’re going to come! I’m talking to you. You can just get your tickets right now at Thrivetimeshow.com. And again, you can name your price. We tell people it’s $250 or whatever price you can afford. We do have some select VIP tickets, which gives you an access to meet some of the speakers and those sorts of things. Those tickets are $500. It’s a two-day interactive business workshop, over 20 hours of business training. We’re going to give you a copy of my newest book, The Millionaire’s Guide to Becoming Sustainably Rich. You’re going to leave with a workbook. You’re going to leave with everything you need to know to start and grow a super successful company. It’s practical, it’s actionable, and it’s TiVo time right here in Tulsa, Russia. Get those tickets today at thrivetimeshow.com. Again, that’s thrivetimeshow.com. Hello, I’m Michael Levine, and I’m talking to you right now from the center of Hollywood, California, where I have represented over the last 35 years 58 Academy Award winners, 34 Grammy Award winners, 43 New York Times bestsellers. I’ve represented a lot of major stars and I’ve worked with a lot of major companies and I think I’ve learned a few things about what makes them work and what makes them not work. Now, why would a man living in Hollywood, California in in the beautiful sunny weather of LA, come to Tulsa. Because last year I did it and it was damn exciting. Clay Clark has put together an exceptional presentation. Really life-changing. And I’m looking forward to seeing you then. I’m Michael Levine, I’ll see you in Tulsa. James, did I tell you my good friend John Lee Dumas is also joining us at the in-person, two-day interactive Thrive Time Show Business Workshop. That’s Tim Tebow and that’s Michael Levine. Have I told you this? You have not told me that. He’s coming all the way from Puerto Rico. This is John Lee Dumas, the host of the chart-topping EOFire.com podcast. He’s absolutely a living legend. This guy started a podcast after wrapping up his service in the United States military and he started recording this podcast daily in his home to the point where he started interviewing big time folks like Gary Vaynerchuk, like Tony Robbins, and he just kept interviewing bigger and bigger names, putting out shows day after day, and now he is the legendary host of the EO Fire podcast and he’s traveled all the way from Puerto Rico to Tulsa, Oklahoma to attend the in-person June 27th and 28th, Thrive Time Show, two-day interactive business workshop. If you’re out there today, folks, you’ve ever wanted to grow a podcast, a broadcast, you want to get an, you want to improve your marketing, if you’ve ever wanted to improve your marketing, your branding, if you’ve ever wanted to increase your sales, you want to come to the two-day interactive June 27th and 28th Thrive Time Show business workshop featuring Tim Tebow, Michael Levine, John Lee Dumas, and countless big-time, super successful entrepreneurs. It’s going to be life-changing. Get your tickets right now at Thrivetimeshow.com. James, what website is that? Thrivetimeshow.com. James, one more time for the 40s. Thrivetimeshow.com. This moment we own it. I’m not to be played with because it could get dangerous. See these people I ride with. This moment we own it. Thrive Time Show two day interactive business workshops are the world’s highest rated and most reviewed business workshops because we teach you what you need to know to grow. You can learn the proven 13 point business system that Dr. Zellner and I have used over and over to start and grow successful companies. We get into the specifics, the specific steps on what you need to do to optimize your website. We’re going to teach you how to fix your conversion rate. We’re going to teach you how to do a social media marketing campaign that works. How do you raise capital? How do you get a small business loan? We teach you everything you need to know here during a two-day, 15-hour workshop. It’s all here for you. You work every day in your business, but for two days you can escape and work on your business and build these proven systems, so now you can have a successful company that will produce both the time freedom and the financial freedom that you deserve. You’re going to leave energized, motivated, but you’re also going to leave empowered. The reason why I built these workshops is because as an entrepreneur I always wish that I had this. And because there wasn’t anything like this, I would go to these motivational seminars, no money down, real estate, Ponzi scheme, get motivated seminars, and they would never teach me anything. It was like you went there and you paid for the big chocolate Easter bunny, but inside of it, it was a hollow nothingness. And I wanted the knowledge, and they’re like, oh, but we’ll teach you the knowledge after our next workshop. And the great thing is we have nothing to upsell. At every workshop, we teach you what you need to know. There’s no one in the back of the room trying to sell you some next big get-rich-quick, walk-on-hot-coals product. It’s literally we teach you the brass tacks, the specific stuff that you need to know to learn how to start and grow a business. And I encourage you to not believe what I’m saying, and I want you to Google the Z66 auto auction. I want you to Google elephant in the room. Look at Robert Zellner and Associates. Look them up and say, are they successful because they’re geniuses, or are they successful because they have a proven system? When you do that research, you will discover that the same systems that we use in our own business can be used in your business. Come to Tulsa, book a ticket, and I guarantee you it’s going to be the best business workshop ever. And we’re going to give you your money back if you don’t love it. We’ve built this facility for you, and we’re excited to see it. And now you may be thinking, what does it actually cost to attend an in-person, two-day, interactive, Thrive Time Show business workshop? Well, good news, the tickets are $250 or whatever price that you can afford. What? Yes, they’re $250 or whatever price you can afford. I grew up without money and I know what it’s like to live without money. So if you’re out there today and you want to attend our in-person, two-day interactive business workshop, all you’ve got to do is go to Thrivetimeshow.com to request those tickets. And if you can’t afford $250, we have scholarship pricing available to make it affordable for you. I learned at the Academy in Kings Point, New York, acta non verba. Watch what a person does, not what they say. Whoa! Good morning, good morning, good morning. Harvard Kiyosaki, The Rich Dad Radio Show. Today I’m broadcasting from Phoenix, Arizona, not Scottsdale, Arizona. They’re close, but they’re completely different worlds. And I have a special guest today. Definition of intelligence is if you agree with me, you’re intelligent. And so this gentleman is very intelligent. I’ve done this show before also, but very seldom do you find somebody who lines up on all counts. And so Mr. Clay Clark is a friend of a good friend, Eric Trump, but we’re also talking about money, bricks, and how screwed up the world can get in a few and a half hour. So Clay Clark is a very intelligent man and there’s so many ways we could take this thing but I thought since you and Eric are close, Trump, what were you saying about what Trump can’t, what Donald, who is my age, and I can say or cannot say Well I have to, first of all I have to honor you sir, I want to show you what I did to one of your books here There’s a guy named Jeremy Thorne who was my boss at the time. I was 19 years old working at Faith Highway. I had a job at Applebee’s, Target, and DirecTV. He said, have you read this book, Rich Dad, Poor Dad? I said no. My father, may he rest in peace, he didn’t know these financial principles. I started reading all of your books and really devouring your books. I went from being an employee to self-employed to the business owner to the investor. I owe a lot of that to you. And I just want to take a moment to tell you thank you so much for allowing me to achieve success. And I’ll tell you all about Eric Trump, but I just want to tell you thank you, sir, for changing my life. Well, not only that, Clay, thank you, but you’ve become an influencer. More than anything else, you’ve evolved into an influencer where your word has more and more power. So that’s why I congratulate you on becoming. Because as you know, there’s a lot of fake influencers out there, or bad influencers. Yeah. Anyway, I’m glad you and I agree so much, and thanks for reading my books. Yeah. That’s the greatest thrill for me today. Not a thrill, but recognition is when people, young men especially, come up and say, I read your book, changed my life, I’m doing this, I’m doing this, I’m doing this. I learned at the Academy, at King’s Point in New York, acta non verba. Watch what a person does, not what they say. Hey, I’m Ryan Wimpey. I’m originally from Tulsa, born and raised here. I went to a small private liberal arts college and got a degree in business, and I didn’t learn anything like they’re teaching here. I didn’t learn linear workflows. I learned stuff that I’m not using, and I haven’t been using for the last nine years. So what they’re teaching here is actually way better than what I got at business school. And I went what was actually ranked as a very good business school. The linear workflow, the linear workflow for us and getting everything out on paper and documented is really important. We have workflows that are kind of all over the place. So having linear workflow and seeing that mapped out on multiple different boards is pretty awesome. That’s really helpful for me. The atmosphere here is awesome. I definitely just stared at the walls figuring out how to make my facility look like this place. This place rocks. It’s invigorating. The walls are super. It’s just very cool. The atmosphere is cool. The people are nice. It’s a pretty cool place to be. Very good learning atmosphere. I literally want to model it and steal everything that’s here at this facility and basically create it just on our business side. Once I saw what they were doing, I knew I had to get here at the conference. This is probably the best conference or seminar I’ve ever been to in over 30 years of business. You’re not bored. You’re awake and alive the whole time. It’s not pushy. They don’t try to sell you a bunch of things. I was looking to learn how to just get control of my life, my schedule, and just get control of the business. Planning your time, breaking it all down, making time for the F6 in your life, and just really implementing it and sticking with the program. It’s really lively, they’re pretty friendly, helpful, and very welcoming. I attended a conference a couple months back, and it was really the best business conference I’ve ever attended. At the workshop, I learned a lot about time management, really prioritizing what’s the most important. The biggest takeaways are, you know, you want to take a step-by-step approach to your business, whether it’s marketing, you know, what are those three marketing tools that you want to use, to human resources. Some of the most successful people and successful businesses in this town. Their owners were here today because they wanted to know more from Clay and I found that to be kind of fascinating. The most valuable thing that I’ve learned is diligence. That businesses don’t change overnight. It takes time and effort and you’ve got to go through the ups and downs of getting it to where you want to go. He actually gives you the road map out. I was stuck, didn’t know what to do, and he gave me the roadmap out step by step. We’ve set up systems in the business that make my life much easier, allow me some time freedom. Here you can ask any question you want, they guarantee it’ll be answered. This conference motivates me and also gives me a lot of knowledge and tools. It’s up to you to do this. Everybody can do these things. They’re stuff that everybody knows, but if you don’t do it, nobody else is going to do it for you. I can see the marketing working, and it’s just an approach that makes sense. Probably the most notable thing is just the income increase that we’ve had. Everyone’s super fun, super motivating. I’ve been here before, but I’m back again because it motivates me. Your competition’s going to come eventually or try to pick up these tactics, so you better, if you don’t, somebody else will. I’m Rachel with Tip Top K9 and we just want to give a huge thank you to Clay and Vanessa Clark. Hey guys, I’m Ryan with Tip Top K9. Just want to say a big thank you to Thrive 15. Thank you to Make Your Life Epic. We love you guys, we appreciate you and really just appreciate how far you’ve taken us. This is our old house. Right, this is where we used to live two years ago. This is our old neighborhood. See? It’s nice, right? So this is my old van and our old school marketing. And this is our old team. And by team, I mean it’s me and another guy. This is our new house with our new neighborhood. This is our new van with our new marketing. And this is our new team. We went from four to 14, and I took this beautiful photo. We worked with several different business coaches in the past, and they were all about helping Ryan sell better and just teaching sales, which is awesome, but Ryan is a really great salesman, so we didn’t need that. We needed somebody to help us get everything that was in his head out into systems, into manuals and scripts, and actually build a team. So now that we have systems in place, we’ve gone from one to 10 locations in only a year. In October 2016, we grossed 13 grand for the whole month. Right now it’s 2018, the month of October. It’s only the 22nd, we’ve already grossed a little over 50 grand for the whole month and we still have time to go. We’re just thankful for you, thankful for Thrive and your mentorship and we’re really thankful that you guys have helped us to grow a business that we run now instead of the business running us. Just thank you, thank you, thank you, times a thousand. So we really just want to thank you, Clay, and thank you, Vanessa, for everything you’ve done, everything you’ve helped us with. We love you guys. If you decide to not attend the Thrive Time workshop, you’re missing out on a great opportunity. The Atmosphere plays office is very lively. You can feel the energy as soon as you walk through the door, and it really got me and my team very excited. If you decide not to come, you’re missing out on an opportunity to grow your business, bottom line. Love the environment. I love the way that Clay presents and teaches. It’s a way that not only allows me to comprehend what’s going on, but he explains it in a way to where it just makes sense. The SEO optimization, branding, marketing. I’ve learned, marketing is key, marketing is everything. Making sure that you’re branded accurately and clearly. How to grow a business using Google reviews and then just how to optimize our name through our website also. Helpful with a lot of marketing, search engine optimization, helping us really rank high in Google. The biggest thing I needed to learn was how to build my foundation, how to systemize everything and optimize everything, build my SEO. How to become more organized, more efficient. How to make sure the business is really there to serve me, as opposed to me constantly being there for the business. New ways of advertising my business, as well as recruiting new employees. Group interviews, number one. Before we felt like we were held hostage by our employees. Group interviews has completely eliminated that because you’re able to really find the people that would really be the best fit. Hands-on, how to hire people, how to deal with human resources, a lot about marketing and overall just how to structure the business, how it works for me and also then how that can translate into working better for my clients. The most valuable thing I’ve learned here is time management. I like the one hour of doing your business is real critical if I’m going to grow and change. Play really teaches you how to navigate through those things and not only find freedom, but find your purpose in your business and find the purposes for all those other people that directly affect your business as well. Everybody, everybody, everybody, everyone, Everybody. Everybody. Everybody. Everybody. Everyone needs to attend the conference because you get an opportunity to see that it’s real.