To do list

I've decided to create a basic laundry list of what we'll need to do over the next 11 months to get this show on the road, I'll add more as I go along:

1. Decide which equipment to purchase and vendors to use
   
2. Develop a marketing plan, so we can get in the black fast!!
   
3. Decide which frames to use in the optical. We are targeting roughly 600 frames
   
4. Create office forms

If you're reading this blog and wondering where you can "borrow" money from to start your practice. We asked for $330,000 and got it (remember: it never hurts to ask for more money. We likely wont use all of it and are trying to stay lean with our startup). Here are some options:

• http://www.matsco.com (0% down, based off your credit, and will usually need 2 years of experience). Read the fine print for a pre-payment penalty.
  
• A local bank. I went into a local bank and asked to speak to the Vice President of Commercial lending.. I introduced myself, had a business plan and tried to win him over. He was all for it! This is the way I went.
  
• A good introductory article
  

Oh, stay tuned for photos of the building and blueprints that we sent to the contractor!

WE OWN IT!!!

Woohoo!! I drove up July 15, 2009 to the title company's office and officially closed on our first building!! What a tremendous adrenaline rush it was. Seeing as how it was my first deal, I would say everything went pretty smoothly. The truism in commercial real estate is that you make your money when you buy the property for as cheap as possible & also at the closing table.

Deal Highlights:

• Total purchase price: $290,007.50 on our HUD settlement statement. $286,000 was the building price + $4007.50 for settlement charges. An HUD statement is a formal document which shows where money changes hands. I also received the appraisal report back from the bank shortly a week after the purchase, which valued the property at $295,000. Which means, I have built in equity right off the bat.
• Amount I was responsible for: $50,076.69
• Capitalization Rate: 8.03%
• Cash on Cash Return: 15.3%
  

I also made my first payment to the bank today ($1367 is the monthly note/payment, for the next 30 years). I also received my first rent check from our tenant that occupies the building for $5000.00.. they are set to leave at the end of October. So this rental income is an added bonus. The building however, will be vacant until our finish-out starts in March 2010.

Which brings me to the next subject: Buildout!!

• Our contractor has given us an estimate of the remodelling job. It was priced at $90,000 for a high quality finish out. I sent him blue prints of the property, they came and looked at it last month, and last week I also sent them pictures of my favorite offices/with comments that I would like to incorporate in our own.

In the meantime, after getting my feet wet with real estate, I purchased a few books on commercial/residential property investing because I've really enjoyed this experience. Things have been busy.

Closing date, and HVAC!

Good news: The bank also informed us this week that we can shoot for July 13 as a closing date!

The only major flaw with the building as discovered by the inspection was the HVAC system. Well, I'm an optometrist.. not a handyman. So I had to figure out roughly what this would cost me. I called one A/C company and really played dumb and had him come out to the property and give me a bid. He quoted me $9500 to replace my split system units.

Well I used this information to help leverage my position. I then sent this bid over to the seller/broker and said that this added expense would be tough for us. To make this a win-win situation, I asked for a credit-at-closing in exchange for closing on the building quickly. Suprisingly, the seller agreed.

So when I close on the building for 286,000.. I will also recieve a credit for $7000.

1st attorney bill

I also received my attorney bill yesterday. Guess how much? $2116.50!!! That was for reviewing the purchase contract (10 pages), email correspondence, changes to the contract, etc. He billed me for a total of 8 hours--okay, whatever. I spent a total of 45 minutes on the phone with him.

Well today, my attorney emailed me and asked me whether he wanted me to also let him review the title commitment. I'm a little gun shy of running to him with questions, expecting another stiff bill. Luckily, I had a patient of mine (title/escrow officer) look over everything for me and tell me it was clean.

I have nothing against my real estate attorney, he is good at what he does.. but I really don't see how he spent 8 hours of work on this. I'm not in the best mood right now.

Loan comitment!

Woohoo!! Good news. We've got a commitment letter from both banks: the local bank to fund our building purchase, and an optometric lender for the practice.

Our practice (PLLC) will lease from our building corporation (LLC).. there are several advantages to keeping the two separate, I'll go over those another day.

Timeline of events so far:

• May 30-we found our building
  
• June 4-incorporated LLC with the State
• June 12-executed contract on the building with attorney
  
• June 12-local bank gives us commitment letter for building
• June 17-hired inspector to evaluate property
  
• June 25-practice lender gives us commitment
  

Our loan

We intend on purchasing the building now and holding it, simply because the location is GREAT! The building was actually owned by an ophthalmologist 10 years ago, so remodelling it will be easier (hopefully). We dont plan on occupying the space until we've finished our contract with the seniordoc, set to expire next July. BUT, this gives us plenty of time to get everything in order.

1. I actually applied with two different SBA lenders (7a loan) to finance us for the building purchase and the practice loan. I made them compete with each other to get the best possible rate. They agreed to finance us over 25 years with Prime+2.25% as our rate. Total size of loan: $588,000
2. Then I applied with a local bank (for the building), and an optometric lending company (for the practice loan). This would be the best option for us, and would keep our business local. Total size of loan: $660,000

Favorite Optometry pertinent websites

These resources have helped me tremendously over the last several years..

www.odwire.org The holy grail of optometry websites
www.proactod.org (exclusive version of ODwire, great for discounts!)
www.optiboard.com (Join the ProForum, and learn how to make money with your optical)

There are countless individuals on both boards that share their experiences in our profession. Being an optometrist isn't easy, so I'll take as much help as I can get.

Critical updates

1. About two weeks ago we formed our first ever corporation, an LLC to "own" real estate. It Cost: $750 on mycorporation.com, pretty easy to fill out, and we also got a Tax ID with it. It should be arriving today in the mail, which includes our certificate of formation, articles of incorporation, and Federal TaxID (FEIN).
2. We executed the contract on the building we found last Friday!! There was a 3 day time limit on when we had to get the "earnest money" to the title company. Cost: $3,000. I FedEx'd it to them the same day ($21).
3. Then the same day, we got a committment letter from the local bank. They requested an $800.00 check to start the appraisal process. I FedEx'd that on Sunday night ($21)
4. I ordered an inspection of our potential building today ($480 for inspection, $120 for termite evaluation). I've gotta be comfortable knowing this property before I sink my life into it. The inspector will have our report this week.

Jeez, we're spending money like its going out of style!!

We also managed to find an attorney to represent us ($1000 retainer fee, and billing us $255 an hour. OUCH!!!). He is very quick at getting to us and always a phone call away, but to be honest.. I asked him way too many basic questions, stuff that I should've used a real estate broker for. I would reserve using the attorney ONLY for reviewing contracts. During the negotiation process attorneys should make you understand the language in your contract in plain english.

Also, we found a local CPA to use. I'll post his prices later.

Major updates

Its been a few weeks since I've posted. It seems as though every time I post, major changes have occured. Well we've decided NOT to stay here for 2 years.

Here's the kicker.. do we want to stay the entire 1 year, or leave sooner????

Well we've been scouting properties in our future town, and even got a realtor working for us. We've come to the realization she's not very good, because we were able to find out more about buildings and properties by calling ourselves and doing our own research. One building used to be an OMD's office (who left town), then converted into an attorney's office. We were pleasantly suprised when we looked at it today, discovering the optical, front desk, the exam lanes in virtually the same condition. Our realtor couldn't even get us in touch with the owner of the place, or with his broker. I managed to find out their information on my own, and met them today.

Looks like we're going to need more money. Matsco approved my loan for 330K, but.... it was intended for a "lease, buildout" not a building!!

How to start a business 101

I'm going to squeeze in a quick post before I forget, and my next patient.

Its basically a 4 step process:

• file with your state to form a business,
• apply for a tax ID,
• get sales tax permits,
• and learn labor laws. Great.

Next, I'm in the middle of making a "timeline" style reminder list to organize everything that needs to be done before we open our doors. Doc Softy stressed that she really wanted to be on the same page, and figure out which tasks needed to be delegated. No prob!