Finding Executec Suites – Chapter 17 from Addicted to Real Estate by Phil Falcone
Chapter 17 Finding Executec Suites
In the summer of 2006 during my so-called dark patch, I found the commercial deal I’d been looking for. The building and business is called Executec Suites with forty-seven offices located in Huntington Valley, Pennsylvania. One of the ways to value a piece of real estate is what we call a cap rate. Basically speaking, a cap rate is figured on the net operating income divided by the sales price equals the cap rate. The higher the cap rate is the better the deal or the better the rate of return on the deal. In 2006 when looking at cap rates of commercial real estate, most were somewhere from 5 to 8. The deal for Executec Suites was a 12.5 cap, an astronomically high number for a piece of real estate at this time. I almost jumped out of my seat when I saw it on a commercial real estate Web site.
When I first saw the building come up for sale, I recognized it immediately because it was the same building I took my real estate license in at the American Real Estate Institute a year before. Working with a commercial real estate broker from the largest firm in Philadelphia called Marcus and Millichap, I received a tour and immediately bid on the building. The asking price was 2.3 million, but through negotiation I was able to get that number down to $2,150,000. Figuring out the value of a building like this wasn’t so easy to do. I was buying a lot more than just a building. As in any other piece of real estate, I was buying the leases along with a lot of things that I wouldn’t normally buy in a piece of real estate, such as the furniture, the artwork, the copier printer scanner, the mail stamping equipment, the telephones and telephone system, 250 telephone and fax numbers, vending machines, coffee makers, and dozens of fake plants and flowers.
The phone and Internet system was a major concern. I had become, by this time, a real estate expert, but one look in the phone could give someone nightmares as it was more equipment and wires that I’ve ever seen jammed in one room before.
You’re providing for these companies everything that they need from the furniture to the Internet to the telephones to the air-conditioning in the office to the cleaning service to the receptionist and the list goes on and on. That means that everything that could possibly go wrong in their office is something they’re going to come to talk to you about. As a landlord, I’ve been used to leaks in the roof as an issue to call the landlord about, but in an executive suite center everything that could possibly go wrong was my problem with plenty of things that could become serious.
Rather quickly, an agreement of sale was put together to allow me to purchase this building with a long period of due diligence and time before we actually settled. One thing you’ll learn about commercial real estate is if you seriously dig into it, every deal has its own set of circumstances that are important to the seller and the buyer. In this case, the seller was not hurting for money in any way but was merely looking to take the equity in this building and roll it into a much bigger development project in another country. They furthermore were concerned about the tax money owed on the profits, so delaying the deal until January of the following year was actually what they wanted. You can’t do a 1031 tax exchange from the United States to another country.
“The more you affirm what you want, the more you believe it. The more you believe it, the more you think and act as one who is getting what you want. And hence, the more it will happen for you.” Marshall Sylver
This was perfect for me considering that I needed $475,000 cash to buy this building and I had approximately $10,000 in the bank. Some people laugh when I tell them something like the last sentence. You didn’t think you needed to actually have the money to buy a piece commercial real estate, did you? If you seriously want to be a commercial real estate investor you must come to terms with what I just said. A rational person wants to go out and raise their money and sell their real estate and have $475,000 sitting in a bank account ready to go before they are even ready to begin the process of looking at a building worth $2,150,000, but I can assure you that the system doesn’t work that way. If that’s the way you conduct yourself, every commercial deal you do will cost you 15 percent capital gains tax on all the money you use to buy this building. You’ll never successfully conduct a 1031 tax exchange program if you’re selling the buildings prior to finding the ones you want. If you do accomplish this, you then end up purchasing a building you really didn’t want to buy but you had to avoid paying the capital gains tax, which is just as bad as the first scenario or even worse.
There’s no room for mistakes in commercial real estate. I talk in this book about all the dumb mistakes I made when I bought my first piece of real estate. I take a little risk as a writer of this book because I could easily see the reader thinking, “Why should I follow the advice of a guy who made a stupid move that I didn’t even make?” It questions my credibility when I tell you about some of the dumb mistakes I’ve made in the past, but they were critical to developing to the level that I am at today. The mistakes I made on Arthur Street tortured me for years and helped me to avoid making similar mistakes in the future. Avoiding mistakes became a serious part of my thinking process.
I think the only way to do it successfully is to find the deal that works perfectly for you and figure out a way to finance it later. If the sellers of the building are not comfortable with that, then you need to go find another seller in another building. I certainly don’t tell them I don’t have all the money, and for some reason most of them don’t ask. If I represented the seller as a realtor, you could bet your butt that would be the first question out of my mouth.
These kinds of challenges come up constantly when looking at commercial real estate, and your negotiation skills and your salesmanship will make the difference between this deal working or not. As I’ve mentioned in several deals in the past, the sellers weren’t even astute enough to ask me where the down money was. If I were selling a building, it would be the first question I ask. Before I sat there and had a buyer asking me one thousand questions, I would need to know that he was qualified before going any further. If he wasn’t qualified, he would have to do a lot of explaining. Details of his existing piece of real estate would be needed or how he was going to prove he had home equity lines of credit or some other source of financing that would make this deal possible. Otherwise the conversation was over. The flipside of that is that if somebody had hit me with that kind of attitude he may have never gotten the buildings sold, so unless I’m sitting at the table listening and looking into the eyes of the buyer, I can’t possibly advise what to do except to say keep an open mind.
As I have written, if the sellers of this building or the realtors representing the seller had asked me just one simple question—can you show me the money before putting this building under agreement of sale?—then the deal would’ve never happened. Luckily for me, no one ever asked me for proof of funds so I wrote $100,000 down money check off a home equity line of credit, and I immediately put eight pieces of residential real estate up for sale to pay for this building. Because I had a real estate license, it took me all but three hours to list as much of my portfolio as necessary to raise the deposit money to purchase this building.
Much to my surprise, I sold four buildings rather quickly including handling both sides—buyers I found plus the listing for the seller, me, of two buildings’ transactions, saving me even more money on the real estate commission side. One of the buildings I sold during this time was the very first duplex I ever bought, Arthur Street. Remember all the mistakes I discussed about that building and the regret I had from all the mistakes I made with it. During the early 90s, almost everyone I knew told me to sell the building and cut my losses, but I never listened to them. Now I was able to reap the rewards from not selling that building in the 90s. I was able to get Arthur Street under contract for $155,000 giving me a profit of $100,000. That money was critical in making Executec Suites a possible purchase for me.
I started thinking about the $10,000 down I put on that building some seventeen years earlier and how when you use a 1031 exchange, the down money you put into a property like Arthur Street simply gets moved to a property like Executec Suites. In a way it’s like the $10,000 is still with me today, similar to ten thousand little soldiers working their tails off to make me rich. When I walked around my new office building, I would sometimes think about the fact that $10,000 dollars is still right there with me helping me advance financially. It somehow made all the trouble I went through with that first purchase suddenly worthwhile. I guess the moral to this story is sometimes it pays to hang in there when you’ve made a questionable investment.
Generally speaking, I raised approximately $100,000 cash from each of the four buildings within a matter of about ten weeks leaving me only short $75,000 to purchase the building. I had more than enough available funds on my credit line that I could proceed with buying the building now and putting up the rest of my buildings for sale necessary to pay off my home equity line of credit later.
The deal got better because when you buy a commercial piece of real estate that has a rent roll of over $40,000 a month, you also receive the security deposit and the last month’s rent. Those security deposits and last month’s rent totaled to approximately $60,000 leaving me only $15,000 of my own money to come up with to buy this building. Four separate pieces of real estate that I sold for approximately $100,000 a piece and did a 1031 exchange program from each of those four buildings into the new building, accepting all of that equity without paying a dime of tax money. That’s $400,000 in monies sitting in my attorney’s 1031 exchange account and $60,000 in last months or security deposits.
Now that I managed to raise the money for the building, I went back to the seller to try to move up the settlement date so I could settle on this building as quickly as possible. Since I already had it under agreement of sale, the profit that would be coming from this building would be something like $15–$20,000 a month. I didn’t want to waste any more time waiting to get that money. Regardless of the fact that I had already agreed to wait until the end of the year to purchase the building, I needed to accelerate the sale so I invented some time constraints on my 1031 program.
Making an exchange through the 1031 program is not as easy as it sounds. You have only forty-five days to identify the property you intend to buy. You have a grand total of six months from the day you sell the original property to the day you actually settle on that property to make the deal happen. If there is any reason the deals that you’ve identified cannot be settled, which happens more than it can be settled, you will have to accept the money and pay the taxes. There’s a lot of pressure doing at 1031 exchange because if you’ve got, like I had, $400,000 sitting in a 1031 exchange program from the four buildings I sold, the tax implication to me at 15 percent is $60,000. That’s a lot of balls to have up in the air juggling at the same time.
The owner of the building understood the basics of the 1031 program and knew that as time ran out on my tax exchange program I would have to pay taxes on that money and have less money to buy the building. He did not ever ask me about down money, so he didn’t know when I sold the buildings. Always ask as many questions as you can think of. Therefore he did not have much of a choice but to agree to settle more quickly, so in October of 2006 I settled on Executec Suites for $2,150,000. WOW!
“Well done is much better than well said.” – Benjamin Franklin
I spent the next three months trying to learn about the new building and business I just purchased. I felt absolutely fantastic about the decision I had made to buy this building. After spending so many years trying to buy buildings that I backed out of, not only was I successful in purchasing this building, but it was the best one by far of anything I have looked at to date. It may not have been a class “A” building, and it certainly wasn’t the newest, but the rent roll and location was tremendous. The business also suited my skill set and was close to my home, only eight miles away. I was thrilled about what I had just accomplished.
I would often ask myself why would a building at 12.5 percent cap rate sit on the market and not be gobbled up by somebody who had a lot of money. I came to the conclusion that there’s too much maintenance involved in a building with forty-seven smaller offices versus some larger retail operation with half a dozen big stores. Somebody who has millions of dollars to spend on a commercial piece of real estate wants to buy a piece of real estate and show up once a quarter to see how it’s doing. This is not that kind of investment. Executec Suites is the kind of investment that requires a staff of individuals to operate it. Maybe a person who has that kind of money necessary to purchase this type of building doesn’t want to deal with the work necessary to operate it properly. Therefore I concluded that I was the perfect individual to buy this building. A guy who barely had enough money to scrape together to make the purchase but was still hungry enough to work it into a success.
“Either make your money work for you or you will always have to work for your money.” – Marshall Sylver
For days I walked around the building on cloud nine thinking what an amazing move I just made. Then an interesting thing happened. Executec Suites is what we call an executive suite center that rents offices to individuals who have small companies and provides an answering service for those businesses by having two full-time receptionists answer the phones at the front desk. My new office was just an earshot away from the front desk, and I kept hearing the name of an individual named Joe Rice from the cleaning business in my building. Sure enough, my buddy Joe, who first told me about real estate and that duplex that he owned in Philadelphia, turned out to be a tenant in my new office building. The guy who first turned me on to the idea of real estate is a tenant. It’s great to be reunited with my old friend who I see all the time now whenever I’m at my building. It doesn’t get any better than that.
The location of Executec Suites is perfect for a number of different reasons. It’s positioned approximately one mile outside of Philadelphia, and the city hammers its small business entrepreneurs with taxes and fees. Many young entrepreneurs want an office in our building because we’re close to their home but out of the city saving the money. We are close to the Northeast Philadelphia area, where there’s a large concentration of Russian and Jewish people. I have a great deal of respect for some of these young entrepreneurs who are second-generation immigrants to this country but who act more like Americans than the actual Americans.
What I mean by that is young Russians come here and start their own businesses where they struggle to try to make something of their lives. Some of them fail and some of them succeed, but they continue to try until it works. Most of their employees are Americans showing that the entrepreneurial spirit of the young people in this country is dying by the thousands. I have developed a great deal of respect for these young people who come here with this attitude. I think that the American spirit is most present in the heart of the entrepreneur. Wake up young Americans before you find yourselves working for first- or second-generation immigrants. Capitalism is alive and well in the hearts of hungry young entrepreneurs who want something more than a handout from the government.
Even with a real estate license when it comes to commercial real estate, you sometimes need to deal with the professionals. At least you need to deal with the professionals when you’re the buyer because all the good commercial properties usually go through big commercial real estate brokerages. The way a lot of these large commercial brokerage houses work in Philadelphia is something like this. They have approximately fifty agents in the Philadelphia office, but each are assigned geographic territories as well as commercial real estate categories that they specialize in. Their job is to go out there and meet every commercial real estate owner in their category in their territory. Because of their aggressive telemarketing and sales strategies, they get a very large percentage of the commercial listings. While it’s true that some commercial real estate owners may want to list the building with a realtor they know is residential, most who know the business well would not go that route. Putting a commercial piece of real estate on the residential multiple listing service can’t hurt to get some marketing out there, but in most cases my experience has shown that this will not get the building sold.
What gets the building sold is a large commercial real estate brokerage that has a massive database of all the major commercial players in the area. If you were to give the listing to one of these brokerages, the first thing they would do is take your listing and make it firsthand knowledge to the individual agent’s personal list of customers. The next thing he’ll do is take your building to the personal list of customers that each of the other fifty agents in his office has. Some of these firms have fifty offices all over the country, so the third step would be to go to all the agents and all their list of clients throughout the country. While it’s a long shot to expect that an investor from Chicago would buy a piece of property in Philadelphia, it does happen in the commercial world more than you think. Especially when the individual in Chicago has a 1031 exchange and he’s pressed for time to identify a building to purchase, a guy in Chicago might just make such a move to avoid paying the 15 percent capital gains tax that will come with the sale of that building.
These large brokerage firms also work with real estate investment trusts purchasing class “A” properties all over the country for thousands of investors. If you’re unfamiliar with this investment vehicle, it’s similar to a stock fund owned by many individuals who put their money in and professional individuals manage the investment, or at least you hope. There is even a real estate investment trust (REIT) that can be used as a 1031 tax exchange. For example, let’s say you just sold a building and you have many dollars of profit, and your time constraints are running out quickly as far as where you can invest the money. There are funds you can put the money into that will invest into real estate and qualify so that you don’t have to pay the taxes on the money. As all good things, there is always a catch. Usually these funds require a minimum investment of $400,000 and a minimum time frame of five years. But it still beats paying 15 percent on $400,000 or $60,000 in taxes.
Anyway, in summary when it comes to selling a large piece of commercial real estate, what you’re getting from the big brokerage house is their list of contacts as well as their experience. Mostly their valuable contacts is what I view you’re paying for when you do business with them. I have my own real estate license and I can list my own buildings for sale. I can advertise my buildings on Web sites like Loopnet and Costar to inform investors my buildings are for sale, but these sites cost money to have access to them that many real estate investors are not willing to pay. I had a membership to both in the past, but my dues ran over $1000 a year for both. I eventually canceled my membership with these organizations, as there are other ways to find properties. If I was selling a large piece of real estate today, I’d be tempted to list it and market it myself, but in the end I feel I’d be calling the large firms to get the word out to their clients and they won’t do that for you without an exclusive listing agreement.
For an executive suite center, the strategy is to own the building in one name and the business of running the building in another. This is for the purpose of separating them should you ever wish to sell the building or the business and keep the other. For example, one thing that some of my competitors have done over the years is the owner would keep the building and sell the business to somebody for several hundred thousand dollars. The person who buys the business would also agree to a long-term lease to pay rent back to the owner of the building. This is a terrific exit strategy where I would end up still owning the building, which is the place I believe all the real money is made in this business anyway.
I decided to name the business of running the building Falcone Real Estate Holding Corporation. I had given considerable thought to using this name prior to buying this building and have to say I love it. I don’t think I am a narcissist, but much like Donald Trump, I have a strong desire to have the Falcone name associated with my real estate investments. Putting the word holding in the name explains what my company is really all about. I consider myself a buy and hold investor. I couldn’t wait to get my business cards printed up and changed the sign out front so that I could see Falcone Real Estate Holding Corporation in bright lights as I’ve always dreamed. I was always impressed with my parents’ name on the business of Falcone Printing Service, and I finally was able to have my name on my business cards and signs. I’ve had some interesting business cards in the past that I would like to share with you below.
My latest card for Executec Suites may not look like much to you, but I have put a tremendous amount of thought into every word on it. Your image is everything, and your business card is a big part of your image so don’t cheap out when you make one and don’t make quick decisions on what you will put on it. Every word you put on it along with the colors right down to the phone numbers and e-mail addresses say something about you. Don’t take the production of your business card, your Web site, or any signs in front of your building lightly. These items are saying a lot about you, and they need to be thought out properly. I recommend hiring a marketing consultant to help you understand all the hidden secrets of that business. I recommend The Barlen Group in the last chapter of this book. You would be amazed at how different people react to different typefaces. You could spend an hour discussing with a marketing expert how certain typefaces appeal to women and how others appeal to men. How your color scheme and logo not only have to be planned properly but have to be duplicated on everything you do, helping your clients remember you when they see a truck roll down the road or clients see your business card while paging through their index. When they pass by your building and your sign out front, you create a subliminal image in your client’s mind. Hey, I know that guy. I have been to that building before. They do a nice job there.
I look for things to inspire me to keep moving forward in life. The movie Rudy has always been an inspiration to me. I love the story of the guy who’s five foot nothing and weighs one hundred and nothing but sacks the quarterback at the end because his heart will not allow him to fail. I feel a lot like Rudy and have felt a lot like him after I’ve done something like purchasing Executec Suites. To constantly remind me that I too can sack the quarterback, I made the music that callers hear when they’re on hold at Executec Suites the theme from Rudy. I might call the office, and I’m temporarily put on hold so I can be reminded of the spirit of Rudy.
In most executive suite businesses, the building owners will charge a price for the office with additional cost for everything else that has ever been used. There’s a price for the furniture and a price for the receptionist and a charge for use in the conference room until the client is nickel and dimed to death. The theory is to get the client in the building for a cheap price and bang him over the head of a thousand times with little small-ticket items to make a profit. My wife and I decided to change that immediately. We decided to go with the one price fits all for every office starting at $495 a month you get everything you need for our smallest office. Every office had a price that usually was a $595, $695, or a $795 type of number all the way up to several thousand dollars. This was the opposite approach to what people who own these kind of buildings did, but as a professional salesman, I believed I had an inside angle to a better idea than this. For starters, I didn’t feel comfortable deceiving people I was going to be developing a relationship with. Lying to someone is a terrible way to start a business arrangement with him. While I agree if I did business that way I would make more money, I think in the long run I would be less successful. People want to do business with people who are successful and with people they like and trust. I like to think that I leave money on the table with my one-figure approach, but I keep my clients longer because they’re happier and I keep the building more occupied. Another big reason for using this kind of approach is when you’re in the sales presentation and the client has taken fifteen minutes of the day to come see your building, the window of opportunity you have to close the deal is small. If you have to explain to the client all of these items and everything that they cost, it gets very confusing. I could see it in the clients’ faces as I did my first few sales presentations. Going to one price delivers a strategy for removing the questionable look on the client’s face. A guy would sit in my office and say, “so tell me again what is included?” I would tell him, “It’s easier to tell you what isn’t included than what is included. Everything is included for $495 a month except your outgoing phones calls.” Easy as can be.
My wife and I decided to upgrade the kitchen along with the landscaping until we got the building to a level we were proud of. Since we had an office building with a captive audience, we tried to come up with ways to provide services that we could also charge more money for. One of those things we came up with was the digital billboard in the lobby. I first got the idea while waiting to be seated at a restaurant; there was a flat screen television set along the wall, and every thirty seconds an advertisement would flip from one vendor to another. I thought it was a brilliant idea that would work in our building. Working together with a Web site designer in my building named Dennis, I began to create a plan. We first made half a dozen slides for our business of renting offices, mailboxes, and conference rooms as well as providing an answering service to the tenants. I will talk more about these features later that are additional profit centers within the building’s walls. Every tenant was given the opportunity to advertise his or her business for free on the digital billboard. All they had to do was pay Dennis $100 to create a slide. This fee was a one-time fee, and advertising in the digital billboard was never charged again as long as they were tenants in the building. With fifty visitors a day coming to the building, we estimated thirteen thousand people a year would see each slide. Not bad advertising for $100 investment. Most of our tenants jumped at the chance to put their ad on the digital billboard. This program also helped Dennis; as he began to create slides for people, he also designed some Web sites and performed other marketing functions for the clients in the building. As Dennis was my client, I was helping him to build more business from his new landlord. I began to claim a phrase that is one of only a few original Phil Falcone quotes.
“Do business with the businesses that do business with your business.” – Phil Falcone
Do you know what a virtual tenant is? A virtual tenant is somebody who uses your building in one way or another who doesn’t actually reside in an office in your building. One way you can have a virtual tenant is by renting him a mailbox very similar to a P.O. Box but much better. A post office box is obvious to everyone that you work at home and have your mail delivered to a box. How does that help your image? My mailboxes provide addresses that create the appearance of having an office at our building. Instead of writing mailbox numbers on your business card, you can put suite #B36. A mailbox in my building at Executec Suites cost $69 a month. Our clients can have their mail delivered to our building, giving them the appearance of a professional organization as opposed to a small company being run out of a residential home. It also keeps their clients from knowing where they live, which is as a landlord a pretty critical thing. Most of our people would stop by daily to get their mail, but some would have their mail delivered to their home. Others would call and ask for their mail to be opened and scanned or faxed to them. Large packages could also be accepted by our receptionists, who would put them in a closet. We even have people who don’t even reside in state of Pennsylvania utilizing our mailboxes as virtual tenants to present the image that they do in fact conduct a business in Pennsylvania.
When I bought this building, contracts were in place for signing people up for mailboxes as well as other virtual services. My experience in sales led me to constantly think, “What was the easiest way to close the deal and make the client feel comfortable?” We decided to offer no contracts on mailboxes. You would be shocked to learn how easy it is to convince people to pay you $69 a month when they don’t have to sign a contract and they can back out at any time. It was a brilliant idea if I do say so myself. Another sales-related idea that helped close deals.
The perception of a salesman has always been negative in this country, but I think the exact opposite. I think the best businessmen you will encounter in your life are also terrific salespeople who have respect for other salespeople. Sales is an art form, and the more energy and effort you put into it, the more success you will have in business.
Another virtual tenant service we provide at Executec Suites is an answering service. If you remember that in the $495 deal as well as any other office deal, you get to a full-time receptionist to answer the phone in the name of your company and patch the calls to you regardless of whether you’re in the office, your car, or at home sleeping on the couch. We were able to do this because we have a special program that identifies the telephone number as it comes into our building, and a screen pops up telling us how to answer this phone and who are the individuals in that company that we may patch the calls to. For $99 a month, our receptionists can answer the phone for businesses that are not even in our building. Did you ever call a painter for example during business hours and a cheesy voicemail box takes your message? When you look on his business card and see 123 Oak Lane, don’t you know right away he is a one-man operation conducting business from his house? Now for only $99 a month, this one-man operation can utilize our receptionist to answer his calls, “ABC Painting Company, how can I help you? Would you like to speak to John Smith? Let me see if he’s finished with his meeting.” The girls would then page John Smith, who could be on the top of the ladder painting a wall, and ask him if he’d like to take the call from his potential client. If he says yes, the call is forwarded to him, and if he says no, the call is put into a computerized voice mail box that he can check remotely which is all part of his $99 fee.
Image is everything in business. People want to do business with successful people, and they feel more comfortable doing business with the corporation that is based somewhere as opposed to an individual working out of his home. The answering service we provide creates a valuable image for our clients and a stepping stone for them to move from a virtual client to an actual client. My wife and I also decided that the answering service would be provided with no contracts, making it very easy for the client to say yes, I will try your service.
Conference rooms are the last piece to the virtual tenant. If a client uses our mailbox, he presents the image of being located in our building, and the receptionists answer the phones for him, which also does the same. But now he needs to meet an important client, and he still works from his home, so he rents our conference rooms by the hour and sets up his appointment with the client at our building. He arrives early for his meeting and is waiting in the conference room for that important client. When the client arrives, he notices he has driven to the address on the business card. As he waits in the lobby, he hears the receptionists’ voices and recognizes them, since he has called so many times before. The receptionist then brings the client to the conference room where our painter friend John Smith is waiting. This completes the illusion that John Smith and the ABC Painting Company are located at Executec Suites.
Virtual tenants make up about $3000 a month in income coming from thirty-five different companies. Some use just the answering service while others use just the conference room. Some ask for a package deal to use all three that we may provide for $200 a month as an example. Imagine that over time being a virtual tenant improves his image to a point where he’s ready for an actual office. At that point a $495 office is less than $300 more and comes with a mailbox, answering service, and conference room included. This is how the virtual tenants slowly progress into actual tenants.
I’ve seen this happen many times before; a company begins to use the virtual services and immediately progresses. It’s a great feeling when you’re making money while helping other people. Too many individuals in this world are making money while screwing people.
At the time I bought Executec Suites, there was a push-button mechanism on all three doors, and every tenant who used our building had a code. If one of the tenants gave the exact code to friends or left the building, it was hard to keep track of all the codes. We decided to switch to an automatic key fob system that would not only provide security for the building but also be a source of revenue. The investment in the key fob system was $7000. We needed about one hundred key fobs to be given out to the existing tenants. At $35 a piece we were able to get back half the money we invested on the system from day one. As each new tenant moved into the building we would get to charge them for new key fobs. It took about two years to get back all of the money we put into it, and the safety of the building is now much better. If the tenant leaves the building, we can deactivate his key fob immediately. If a company in the building has a disgruntled employee, we can deactivate his key fob immediately. If a company wants to know what time their employee came to work, we can provide that information. The key fob system is a decision I am proud of implementing in my office building.
We also put together a deal with direct TV to wire many offices in our building. I wanted to provide a television set for my receptionist to lighten the load of answering eight thousand calls per month. I also wanted to put one in my personal office. Each additional receiver cost us five dollars a month that we are able to charge tenants $49 a month for. Some clients, like stockbrokers and limo dispatchers, who have to be in the building seven days a week, could easily justify the expense. This was just another idea that became an additional source of revenue.
The efficiency of an executive suite center is something I never counted on having. Because I do business with the businesses that do business with my business, I began to do a lot of business with the people in this building. Before I knew it, my real estate broker, my title company, attorney, Web site designer, the accountant, and staffing agency were all people in my building. You would be amazed at how efficient you can be when everyone you work with is located in the same building. It becomes like a networking group as all the people in the building are small companies and entrepreneurs who all have the same kinds of problems. I also constantly try to promote introducing people to one another so that they would do business with each other and strengthen the bonds they have in the building, hopefully getting them to stay longer.
If you like to learn more about Executec Suites, you can visit these Web sites listed below.
On my Web site I have many photos of the building and information about the services we provide, such as mailbox rentals, answering service, conference rooms, and office rentals. I also have a virtual tour that I made showing our building as I walk through it in an interesting five-minute video. If you’re on Facebook, you can look me up and become a fan of executive suites as well as become a friend to me personally. I often post real estate related photographs of the properties that I’m dealing with as well as dates when I’ll be traveling to do seminars on real estate. The same thing goes for YouTube and Twitter; information about my real estate holdings can be found there as well as a personal page I have on Twitter under the name Philly Phil.
“Victory belongs to the most persevering.” – Napoleon Bonaparte
You can also achieve great things in the commercial real estate world, but you have to believe that you can do it and keep reminding yourself that you can continue to do it. Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broad side, thoroughly used up, totally worn out, a vodka in one hand, a cigar in the other while loudly proclaiming—WOW! What a ride!
Thanks for reading this far to and for purchasing Addicted to Real Estate. Would you like a free copy of my office lease? If so just go to www.addicted2realestate.com/officelease and follow the instructions. Thanks again and good luck with your investments.