Articles

Understanding Free Rent

How to make the most out of free rent.

Free rent is obviously a desirable lease concession for tenants to achieve. However, not all free rent is considered equal, and this guide will show how dentists can make the most out of it.

First off, what is free rent exactly? Formally known as rent abatement, these are months where you pay no base rent. Note we say base rent, specifically, because the abatement period most often does not include postponing the costs for expenses and utilities.

To fully grasp the benefits of receiving free rent, you’ll have to understand the construction timeline and the stages of opening your doors to your business. Most lease guides act as if there is a switch, but there isn’t. The right way to think about the opening process is as a sequence of phases tied to your actual cash flow from when you can occupy to when insurance money starts hitting your bank account.

Here is the realistic construction schedule for a dental buildout:

Month 1, construction drawings. Your architect and dental equipment specialist produce the construction documents. You’ll lock down these hires well before signing the lease. This takes about one month for a typical practice.

Month 2, municipal approval. The drawings go to the local building department for permit review, and that will take about another month.

Months 3-6, buildout. These four months are for actual construction, which cannot start until after the permits are in hand. Construction could take longer for a complex build.

Month 7, Certificate Of Occupancy (COO). Administered by the municipality stating the construction is complete, the permits are closed, and you can finally open your doors.

Months 7-11, opening. If this is a startup practice, you’ll spend the first several months getting credentialed with insurance carriers while your patient volume builds.

Month 11/12, cash flow. Insurance reimbursements will now be coming in, and your cash flow will start to look like a real practice.

Yes, this means it takes roughly 11-12 months from signing for the practice to start funding itself.

Now, what does this mean for free rent? There are two approaches to how we like to structure free rent against the construction timeline:

Approach 1, free rent timed to permits (preferred option). Free rent doesn’t start ticking until permits are issued. This way the two months you spend on drawings and municipal review don’t burn any of your free rent allowance, and you’ll have your full free rent period covering the actual construction window and the operational ramp up.

Approach 2, maximum construction time + post-occupancy free rent (most common). If the landlord won’t agree to approach 1, we’ll push for the most amount of free rent during the buildout months AND an additional three to four months of free rent after you open for business. This way your free rent period won’t end while you’re still waiting on insurance revenue.

The biggest takeaway here is you need to clarify when the rent clock starts. How many months will be free during construction? After occupancy? If you don’t ask, the answer is always “at signing,” and that’s the most expensive way to take it.

And for renewals, you’re not building anything new, but you can still receive free rent. Landlords will typically agree to one to two months, but we push for more by pointing out the downtime and all the associated costs the landlord avoided by not having to bring in a new tenant.

 

 

 

Recent:

No results found.
All Articles

What Our Clients Are Saying

Remy was very helpful and straight forward with me about the challenges of starting a practice. He kept me well informed and was very proactive, a professional in every aspect of the real estate business. I could not have navigated this process without him; I will definitely use Remy for our future growth needs.

Dr. Kevin Semma, OD

Remy has been an indispensable part of my journey to build a veterinary practice. I had another commercial realtor that was not familiar with veterinary profession when Remy reached out to me. When I decided to stay with my previous realtor, Remy was willing to answer any questions I had or help in any way, even though I was not signing with him. I felt he genuinely wanted my business to succeed and wanted to help. Soon I realized the importance of having a realtor who has special knowledge of the healthcare field when choosing a space and decided to reach out to him. Remy is very professional, relaxed, and inviting. He brings his own expertise as well as others to consult about different aspects of building a practice. Remy is available, thoughtful, supportive, and assists in problem solving concerns that arise. The process was less stressful, because he was a partner in the process, not just a realtor. I have and will continue to recommend him for any commercial real estate needs.

Dr. Katie Boatman, DVM

Working with Mirlo Real Estate Partners was a great experience, and I could not be more impressed with the level of service I received. From the very beginning, Nick and Remy helped me establish my preferences and outlined the best strategy for my specific situation. Not only werethey able to find the PERFECT space for me in a brand new medical office building, but due to the tight deadline, they were also able to find me an OUTSTANDING temporary space to occupy during the construction period to minimize downtime for my practice. Their hard work and dedication really made the transition seamless. Their knowledge of my needs and the market was STRONG and helped me achieve VERY FAVORABLE terms. I would highly recommend them to any healthcare provider for their commercial real estate needs.

Dr. Alon Kahana, MD, PhD

We are incredibly grateful to Remy Isdaner for guiding us through the challenging journey of starting our veterinary practice. Remy’s knowledge was deemed invaluable from the outset, assisting us in every aspect of the startup process. Remy found just the right building, and it wasn’t even on the market. He contacted the owners and successfully negotiated a favorable deal, making our dream of owning a practice a reality. Remy’s professionalism, persistence, and genuine care for our success truly set him apart. We highly recommend Remy to any business owner needing support with their business endeavors!

Dr. Krysten Andrews, DVM & Dr. TJ Vernaci, DVM

As an established oral surgeon, I can wholeheartedly recommend Remy Isdaner and Mirlo Real Estate Partners to any medical professional seeking to start or expand their practice. Not only did Remy advocate and fight for my best interest, but he also demonstrated an unparalleled understanding of my industry, exceeding my expectations and making the process as smooth as possible. With Remy taking so much off my plate I was able to focus on building and marketing my business, allowing me to open my doors with a full schedule of patients. I could not be more satisfied with my experience working with Remy and my new, state-of-the-art oral surgery practice.

Dr. Robert John, DDS, MD

I am thrilled to share my experience with Mirlo Real Estate Partners. As an oral surgeon, the thought of handling a commercial real estate transaction and the subsequent buildout of my new office was daunting. However, Mirlo made the entire process seamless and efficient. From the outset, they were attentive to every detail of my requirements. Their knowledge and professionalism were evident as they guided us through each step, ensuring that every aspect of the deal was executed at the highest level. Nick and Remy worked hard to advocate for us and were committed partners in our success. Thanks to their exceptional service, I am now operating in a state-of-the-art facility, perfectly suited for my patients and staff. I wholeheartedly recommend Mirlo Real Estate Partners to anyone looking for a reliable and highly competent commercial real estate partner.

Dr. Jeffrey Wasielewski, DDS, MD, MBA