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Episode 15: Office Space: When and how to expand

If you are building a team, where are you going to put them? In this episode, Nelson and Liz discuss different options for housing your team, providing them the space and equipment to serve your customers. Listen as our hosts give you a basic crash course on commercial real estate, and share some of the trials and successes they have had as they have built their teams and their businesses.


SPEAKERS

Liz Sears, Nelson Barss


Liz Sears 00:01

Welcome to the Business Greater Than You Podcast, where we dive deep into the stories of men and women who have successfully transcended the fragile solopreneur life and built productive teams with better lifestyle and income.


Nelson Barss 00:13

I'm Nelson Barss, the founder and owner of Utah Independent Mortgage Corp.


Liz Sears 00:18

and I'm Liz Sears, founder and co owner of My Utah Agents.


Nelson Barss 00:21

We're excited for you to listen, interact and grow with us. So please share your comments below. And let's get started.


Liz Sears 00:33

All right, we're excited. For our next episode, we're gonna be talking about office space.


Nelson Barss 00:37

Yes, I love office space. It's like the funnest part about being a business owner.


Liz Sears 00:42

It actually is!


Nelson Barss 00:42

Like searching for office space laying it out,


Liz Sears 00:45

Especially your first time. It's like,


Nelson Barss 00:46

Yeah, man


Liz Sears 00:46

buying a home for your first time. Yeah, there's a lot of options.


Nelson Barss 00:51

Yeah. So you guys are actually in the process of moving?


Liz Sears 00:55

Yes.


Nelson Barss 00:56

From your third office space to your second office space to your third?


Liz Sears 01:01

Well, technically, we opened our first home headquarters. And then we opened an expansion office. And then we were signed the lease to get into this new space that's supposed to be built out. And with, and we were told it would take just a few months in our current location said, we're not going to do a month to month for a few months. We said Please, they said no. So we said, You know what, during when COVID first hit, everybody worked from home, let's just pretend we're doing that again. So, seven months later, it's still not built. And we still have about four months.


Nelson Barss 01:34

I remember when we guys find out I remember talking to one of your agents. And he's like, Yeah, we just moved everything out because they didn't want to do month to month and they've signed a new lease and, and I knew the space that you had signed the lease for. Yeah, I was like, that's gonna be a long time. They're gonna be without an office for a year. A conference room.


Liz Sears 01:52

A year. So it's gonna be pushing in that. But so we have a little satellite office way down south. So we got north and south, but headquarters, we're still working remotely. And then we just rent a my mind went blank. A reception hall type place that you can do conferences at so we have a lot of our events there for Women's Council of realtors. And for the Board of Realtors. We have events there. And there's the big space in the smaller spaces. And that's where we do our team meeting every week.


Nelson Barss 02:22

Okay, cool


Liz Sears 02:22

So we've had to be homeless. But so we're in the process of working with the architect building it out. So


Nelson Barss 02:28

I'm glad you guys are able to get together.


Liz Sears 02:29

Yeah


Nelson Barss 02:29

Right in person,


Liz Sears 02:31

We've actually noticed there's a disconnect with our team. Since we haven't had like a true home base. So we're really excited to have that back in place. And have that again, so.


Nelson Barss 02:43

Okay, so let's talk about the different options when it comes to office space. First of all, do you really need it? Right,


Liz Sears 02:52

Right. It depends on what you do. Like what your business is, because one of our guests has a photography company,


Nelson Barss 03:00

I just thinking of Aundrea


Liz Sears 03:00

They never get altogether you know. .


Nelson Barss 03:02

Yeah, yeah, it's kind of a virtual team.


Liz Sears 03:05

But she did have an office space for herself that was out of the home that she could go to she was away from all of her stuff that she could focus and had.


Nelson Barss 03:13

Yeah, she didn't have to be there with the kids and the nanny and everything she could go to work away from home. So there's a lot of companies, a lot of companies, real estate companies, especially that they have a very small office for the number of people employed by them. Right.


Liz Sears 03:31

Right.


Nelson Barss 03:31

Agents, 50 agents, but the office is only big enough for like, 10 people.


Liz Sears 03:36

Yep.


Nelson Barss 03:36

And they come and go, and there's a cubicle and they share and they move around. And it's like, trying to catch them all in one place. Almost impossible. Right?


Liz Sears 03:44

Yeah, cuz it's rare that everybody's there all at the same time anyways, except for maybe team meeting, but then you're all in chairs.


Nelson Barss 03:51

My team, I really want everyone together. I really believe in that. I love that I like to energy. I enjoy the relationships. And I think I get more out of them when they're together. So we've had a couple different office spaces. We started I started the company in just a one room. You know, conference room type room space.


Liz Sears 04:10

With your gigantic monitor.


Nelson Barss 04:11

Big monitor, big table. Yep. And I hired my first employee, and he sat on the other side of that table with me and we shared the room. And then we expanded to a space that would fit about eight people. We outgrew that. And luckily we were able to sign a one year lease on that. And when the time for that year lease came up to renew the landlord, who happened to be the same landlord who wouldn't let you go month to month,


Liz Sears 04:38

Right!


Nelson Barss 04:39

He didn't want to let me do another one year lease. Well, he said he would but he was like I really discourage that we don't have any open spaces in this building and someone's going to come in and is going to outbid you and you won't be able to renew.


Liz Sears 04:53

Yep. Yeah


Nelson Barss 04:53

Because you know if someone comes in and says we want to the space I'm gonna give it to him if they offer me a 10 year lease or something right So he kind of scared me. I decided not to renew there and started looking around for space, we found a space not very far away that we were able to seat about 22 bodies in that space. Not very comfortably. We're more comfortable with about 15 in there, right? But we had a lot of people sharing and stuff. I knew that we were going to outgrow it, when I got it. And I was really hemming and hawing between that and another space that was much bigger, twice the lease, right? I just couldn't stomach that I just couldn't do it. And now I'm really glad we didn't. Because you know how our industry especially is so cyclical, right mortgage business with rates and things. So we did max that space out for a while. And then when the rates turned, I was really glad I didn't go with the bigger space, because we lost some people, we downsize a bit, we're much more comfortable there. And it's not too much for me to say, even if I only had four people, I'd still think that lease rate is fair and good for what we're doing.


Liz Sears 06:02

I love it. So and looking for leases. So our very first one, which was with that same landlord was an all inclusive lease. And the first expansion office we got is a triple net lease. And so when we first saw the price per square foot, we thought, Wow, that's a screaming deal. That's so good. And then we found out more details about what the triple net lease is, which means that you pay. And I think it is slightly different. It's kind of up to interpretation. But for this space, we pay our share of the property taxes and the building insurance, we still have to carry our own personal and liability insurance for our equipment and such. And then we have to pay for all of our own utilities and our own cleaning. Whereas with the all inclusive, that was all just part of the price per square foot we were quoted, I think


Nelson Barss 06:53

it's just really important to be careful to understand the total costs of each lease that you're looking at, because the sticker price can be kind of misleading.


Liz Sears 07:02

Yeah


Nelson Barss 07:02

I've always really enjoyed having an agent help me, a commercial real estate agent help me. And I wanted to ask you because you do real estate, I know you've helped a real estate commercial, right? So how does it? How does a person choose an agent when it comes to office space, and you think I'm just renting I don't need an agent, right? I'm just gonna go find a place to rent.


Liz Sears 07:20

Well, when when Shannon and I were getting our first couple places, we had experience as far as we've been exposed to commercial stuff, but we weren't experts in it. And we actually chose to hire a commercial real estate agent because they understood the different clauses and what they mean inside of the contract. And they were able to explain to us what we were agreeing to, and help us understand so we can make an educated decision. And that I think is the biggest difference is being Realtors ourselves having at the time, you know, 10- 20 years experience each. And yet, we still chose to hire professional because when you're signing a legal contract, that's a big deal. And our new space that we just signed, they aren't even using kind of one of the more standard leases, there's as much more robust with some stuff. We're like, What the So we even went above commercial realtor for that piece and had our attorney review it. And our attorney came back and said, there's a couple of clauses in here that could turn around and bite you. And even though it's your friend who gave you the lease, it came from their attorney, and whenever money's involved, if anything turned sideways, you're at the mercy of what's in the lease. And so don't trust friendship, even though that's wonderful to have you put it in writing. It's like trust your neighbors, but lock your door, you know?


Nelson Barss 08:39

Well, I've really enjoyed I have a commercial realtor that I've worked with, now for two different spaces. And he also, we got near to buying a building. We'll talk about that in a minute. But I've really enjoyed having him for one thing, his company kind of dominates the market anyway, they just they know every owner of every building, they know what they'll do and what they won't do. Right.


Liz Sears 09:02

Yeah. And that's huge commercial people may not realize this residential has a ton of laws that govern it in the United States, because it's considered like a layman who would be purchasing and so they've got laws or to protect the common man commercial does not have those same rules like commercial can really be a you know, if you have- dog eat dog, good old boys, you know, however you want to talk about it, those relationships really do dominate. And so if you don't have an in, you could be at a disadvantage. And if you do have an in its exact opposite, like you really have a lot of benefit on your side.


Nelson Barss 09:41

Yeah, he would walk in we'd go into a space, totally dumpy space, right. And he would say, I know the owner of this building. He has been unwilling to put money into this building for a long time. He just signed a lease downstairs and he's finally coming to terms with the fact that he's got it upgrade these spaces


Liz Sears 10:00

Nice


Nelson Barss 10:00

In order to put tenants in. And so I think he would go for this. And this kind of helped me understand what to offer, what to ask for. Let's talk about tenant improvements a little bit. When you, when you sign a lease, a lot of times you're coming into an empty space. And you're going to want things like paint and carpet. Sometimes you're gonna need even more walls moved, it might be at shell space, and you have to build


Liz Sears 10:23

Or it might be super mild, like the space that we moved into. We actually our very first headquarters, we it was a sublet, which means somebody else had leased it. And now they were getting somebody to sublease it from them. And


Nelson Barss 10:36

Take over their lease, basically, right.


Liz Sears 10:38

Our colors are red, black, gray, white, and this was blue and tan. In there, and so we got permission to change the blue wall to red, it was the accent wall, but they wouldn't let us touch anything else. And we're like, Okay, well, we'll do that. So sometimes it's just painting an accent wall and sometimes it's moving walls.


Nelson Barss 10:56

But even that sometimes I've found some of the owners don't want to do it. They don't want you to do it. Right. Other times, it depends on how long the lease is, right? If you're willing to sign a 10 year lease, they will pony up some money to make it nice, right? They're willing to, they're willing to kind of bankroll your construction costs.


Liz Sears 11:17

Yep


Nelson Barss 11:17

For just about anything you need. I was really worried about signing a long term lease. But still, we were able to do we did a three year lease. Technically, it's a five year lease, but we have the option to back out at year three.


Liz Sears 11:32

Yep.


Nelson Barss 11:33

And with that, they gave us enough money for 10 improvements that we had. Everything we had added a we added a break room we got all new carpet, everything was painted, right, we got a new closet with shelving put in and things. And so it was it was nice, you move into pretty much a brand new space. And it didn't cost a dime from my pocket. They ran data cables, where I told them to almost felt like I was the owner of a new home and you're showing up and telling them where to do stuff. It was really fun.


Liz Sears 12:01

Yeah, That's great.


Nelson Barss 12:02

And you're doing that too now, right on your space.


Liz Sears 12:05

Yep. So with our space, a couple of things that we chose to do is the new lease we've signed is kind of a blank slate place where they're coming in, and they're redoing the entire inside. And so when we met with the architect, the first time, we just did all the measurements, and we already knew the size of desks we wanted, which was huge to make sure that when you build the office space, the desk is going to have good flow of where to sit, where to put it all those things. And after our first meeting, we said let's bring our decorator with us the second time. So with our most recent meeting, which was kind of the fine tune, pick the flooring, pick the paint, the countertops, all of those things, even the material for the walls, so some of our office walls are glass, and some of them are you know, drywall or half glass, half drywall. And so she was able to come in and help us pick things that were not on their way out design wise, because for me, um, I like just what's average, you know, and I can sometimes see trends that are coming, but otherwise I'm not a super early adopter of things. And so she said you could do that, but it's gonna be out pretty soon. This is a style that's coming in. And I'm thinking that's from when I was a kid is really, really coming in. She said, Yeah, this will be a good one. And so we were able to pick the the flooring and everything that would match and including light fixtures. And so one of the things we chose is that we put we're putting in 10 phone booths, which are slightly bigger, so somebody could like office in it, but we wanted a light right here, because we do a lot of zoom calls instead of a light, you know from the top that would put you in shadows. And so just some of the other little things to think of that way. I can't wait to see this. I'm so excited


Nelson Barss 13:47

This space just knowing


Liz Sears 13:49

We're putting one of those glass garage doors on it so that way when it's good weather outside, we can open it up and


Nelson Barss 13:54

Really?


Liz Sears 13:55

And so we're we're building a cafe, feel space, which is a pretty good sized room, I think it's like 24 by 24 that people when they're doing social media marketing, things like that you can be there with your buddies, on your laptops, powwowing we're going to have a bar that is going to be like have you know, sodas and waters and snacks and stuff like that for them and their clients. And then we'll have the phone booths for when you want to go have a call and we're gonna have those soundproof so you can shut the doors and then we're going to have a few drop in offices. And we joke about our agents keeping a family photo there so they can put it out on the desk. Make it look like their office.


Nelson Barss 14:29

In drawer, there's like 16 family photos, you put one out.


Liz Sears 14:31

Like a little nameplate can slide in the door. But then when clients coming in, they can just be in the office, the client can meet with them and the client leaves and then they can rejoin whether they want to be in the cafe or have phone booth or you know, whatever


Nelson Barss 14:42

Really flexible, right.


Liz Sears 14:43

Yeah


Nelson Barss 14:43

I like that.


Liz Sears 14:44

Because not everybody needs like a full office.


Nelson Barss 14:47

So when you negotiated your lease, did they pony up the money for a lot of this improvements for all the construction work and,


Liz Sears 14:55

Yep


Nelson Barss 14:56

Now what about furniture?


Liz Sears 14:57

None of the furniture


Nelson Barss 14:58

Obviously.


Liz Sears 14:59

And so, we have found that wayfare, I should, we should get a plug to figure out how to get a plug for this.


Nelson Barss 15:05

Sponsor us Wayfair


Liz Sears 15:07

But they have a business side and the business side was able to get us a discount on it and have it all shipped. And so we were able to find the dimensions of our rooms, get the dimensions of the furniture, and then we just did you know, big, you know, sketch of it and laid it out and put in order that way.


Nelson Barss 15:25

We did. We just found used cubicles.


Liz Sears 15:29

That would probably be cheaper


Nelson Barss 15:30

It was way cheaper. I mean, I think we spent cubicles are pricey. So our desks. Like, I was always calculating a price per butt like, these are really expensive. And we found this call center that had just gone under, just disappeared and left all the cubicles there,


Liz Sears 15:46

Really?


Nelson Barss 15:47

So the building owner was selling them, there's 1000s of them. It was huge call center. And we only needed eight.


Liz Sears 15:51

Yeah


Nelson Barss 15:52

Right. So we'd show up on the day and couple of my employees went down and spent the day disassembling cubes and bringing them back. And that's so cool. Two more days reassembling was a nightmare of a project. But I mean, I think that would probably when we were new, and we were just getting started, that was a big expense, right? I was looking at 10 to 20,000, just for these little cubes for eight people. And I think we got the whole package for two grand or something


Liz Sears 16:16

That's amazing.


Nelson Barss 16:17

They're beautiful. I love them.


Liz Sears 16:19

Our first office space actually was 10 grand, almost exactly to furnish it. And we had three offices Shannon's, mine, and the drop in. And then we had the agent one which we just put standup desks around it. And then we had a training room which we had just those tables, you know that you could do training. So just making sure it's Oh, and our admin desks.


Nelson Barss 16:39

I think that's really important. If you're going to build a team. At some point, you're going to want to think about office space. Right? Working from home, it's really hard to have your team show up at your house. I think it's really hard to have a really good efficient team. If it's always remote. You can speak to this right?


Liz Sears 16:57

Yep


Nelson Barss 16:57

The culture the vibe and especially depends on your industry. If you have customers coming in, if you're trying to build partnerships for me with realtors, I want them to able to come to my office and see that we're live in person active, energetic and together. But there's a price to that, you know, if it's not necessary, if you can find a way, have you ever dealt with virtual not virtual but executive offices very much.


Liz Sears 17:25

Yes. In fact, that is our second expansion office is an executive office and


Nelson Barss 17:30

Tell us how those work.


Liz Sears 17:31

So it's basically a building that has, if I'm thinking of the same thing, it's it's a building that has a front desk person that there the front desk person for the building, and then you rent whatever space you need. And so we just have a single room that we have a couple of desks in, but as a member of this building, we for one, our guests can be greeted by the front desk and wait down there for us to come get them. And we get to use their copiers and the Internet and such. And then we also get to use their conference rooms.


Nelson Barss 18:03

Cool.


Liz Sears 18:04

So if we have anything going on where we are going to have a client event or whatnot, then we can use that space.


Nelson Barss 18:10

You can have packages mailed there, right? There's been quite a few virtual offices. I'll go sometimes when I'm just walking in a building trying to find office space, you find that you find the corner where the virtual crew is, right.


Liz Sears 18:12

Yep. Yeah.


Nelson Barss 18:22

And it's always funny, because they're all leased. They all have a sign on the door. Nobody there. It's like,


Liz Sears 18:26

Yeah


Nelson Barss 18:26

Crickets, right. It's a ghost town. All these people are paying for this office, but they only go there to meet a client.


Liz Sears 18:32

Yeah


Nelson Barss 18:33

Occasionally they don't sit there and work very often. Right. They're probably all waterskiing or something. Right?


Liz Sears 18:39

Because they're cool.


Nelson Barss 18:40

golfing. Awesome. What about owning a building? What do you think about a business, purchasing a building?


Liz Sears 18:48

I think it's brilliant, I the things that you want to take into consideration, or at least some of the things that of a impacted us with deciding whether or not to own a building, because we haven't bought ours yet. But then again, we are, you know, just barely two years old, is just making sure that the space is going to be adequate, long term. And if it's not that it is a space that's rentable to somebody else, conveniently that it's better to work out that way. I know you almost bought a building. So tell me about that.


Nelson Barss 19:19

Very close a partner and I I was really excited about it. I just didn't quite feel comfortable giving up that much capital, because I knew our market was going to turn and I needed to make sure we had enough capital to continue to operate. And so we also ran into some problems with the roof inspection. You know, it had been neglected for a long, long time. And so we were able to back out, but really, it just was It was cold feet about the roof and just about the amount of the investment that it would have taken. We tried to bite off a pretty big building. It was 2,400, 24,000 square feet.


Liz Sears 19:58

That's a big building!


Nelson Barss 19:59

It held like 10 companies that were already in there different office spaces and my partner and I would have filled up the building we both would have put our companies in, and it would have been 100% occupied and was going to cashflow well from day one. Which made it feel about my personal company's lease would have been double what I'm paying now.


Liz Sears 19:59

Yep.


Nelson Barss 19:59

But then most of that was cashflow back to myself for business. And it's interesting the way business the way Corp, commercial buildings are valued, they're valued on cashflow. Right. So the way to rehab a building is to improve the the leases, to get more cash flow, longer term leases. And that all is is calculated into the appraisal. And this This would have been a great investment. It's just I think it was a little premature for me. I think my partner was ready. But I was like, Oh, I can't like just drain my bank accounts right now at this moment, or we'll go out of business. great


Liz Sears 20:54

That was wise


Nelson Barss 20:55

But what a great thing. I mean, you and I are in the real estate world, right? We talk people into ownership all the time, renting versus owning, I just, I just love the idea, especially if you can, you can get an SBA loan for a commercial building. And you only need to occupy 60% of the square footage. And it's 10% down. You can have a tenant in there that helps you cover your cash flow. If you use a conventional loan, I think the one we were looking at required 25 30% down to get this building. But they allowed us to have other lenders involved as well. So we had 70%, financed from the big bank 20% financed from private people. And we were going to do 10%. So it was kind of similar as an SBA loan. But it would have saved us on some fees. And it worked better because we didn't have that much occupancy, right.


Liz Sears 21:49

Yep.


Nelson Barss 21:50

Fascinating. Super fun. I don't know, I probably will always regret not closing on the building. But right now, I don't regret it.


Liz Sears 21:58

Yeah,


Nelson Barss 21:58

Because our market really did turn and our company needed that cash flow needed that money. Right.


Liz Sears 22:03

You know, it's really interesting. I don't often talk about the tow truck company that my husband and I began,


Nelson Barss 22:10

I didn't even know you had that


Liz Sears 22:11

You didn't?


Nelson Barss 22:11

No


Liz Sears 22:12

Yeah, we started tow truck company back in 2005 2004. Right around there. And one of the buildings that we went to look at was $400,000. And we could have bought it. And we decided no, we're brand new. We've never done this before. You know, let's figure this out. And three years later, when we sold the company at end of I think it was beginning of 2007 that exact same property that we would have bought that we could have sold with it was selling for like 1.2 1.3 million.


Nelson Barss 22:41

Wow,


Liz Sears 22:42

One of those things,


Nelson Barss 22:42

Like four times your money.


Liz Sears 22:44

Yeah, but the tow truck company is still in business.


Nelson Barss 22:47

Really? Did you sale it? Way to go. A tow truck


Liz Sears 22:51

Yeah. So that was a time same thing where I was like, you know, what, what if we had bought that property, but you just never know, because what if we bought it in 2007. And then 2008 happened? I mean, you just,


Nelson Barss 23:02

I think, you know, I have a coach, he gets really involved in my money. He told me, I can't buy a commercial building until I have a million dollars of net cash. Now, I don't need that much to buy it. Right. But I think it's about the security and the ability to keep it afloat when things happen. And and he's more interested in in cash than real estate. But yeah, I think there has to be a certain level. I do think, though, that it depends on your company. But I think I think most companies should have that goal. I think it's a great goal to have. We did the math on that building, I would have made more money holding that building for 20 years than operating my company for 20 years.


Liz Sears 23:41

Isn't that interesting?


Nelson Barss 23:42

It's just it's amazing.


Liz Sears 23:43

Yeah. Real estate holdings are pretty spectacular. Alright, I think we covered pretty much everything that we wanted to on this so.


Nelson Barss 23:52

Well, good luck out there on your office space hunting is the funnest part in my mind, of owning a business. Make it nice, make it a good place for your people to come to work. Don't go crazy. Like, you know, the starter home concept applies to office space, too. Right.


Liz Sears 24:08

It does


Nelson Barss 24:09

Get something that fits your, your team now. And a little bit in the future.


Liz Sears 24:14

Yep.


Nelson Barss 24:14

And don't expand until you're busting at the seams.


Liz Sears 24:17

Yeah,


Nelson Barss 24:17

Right. And then then you're ready to expand.


Liz Sears 24:20

Yep. Okay. All right. Thank you guys.


Nelson Barss 24:23

Thank you. See you on the next one. Bye. Bye. You've been listening to the business greater than you podcast with Nelson Barss. And Liz Sears. Our mission is to help lenders and agents like you.


Liz Sears 24:32

If you're either already a full time realtor or looking to become one and you desire to be highly successful. If you're both a learner and a doer, a hard worker and a total team player. We would love to chat with you about joining our team visit us at businessgreaterthanyou.com.


Nelson Barss 24:47

If you're a loan officer or would like to be one we have a path to help you learn the business and develop the skills needed to lead a high performance origination team for better income and lifestyle.


Liz Sears 24:58

And lastly, if you would like to work with with either of us we would love your business


Nelson Barss 25:02

Do you have a question for a future show would you like to be considered as a guest on our show if so please call or text our listener line at 801-871-9130


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