Opinion, by Sam Flowers
RIO DE JANEIRO – Many clients and friends comment that Gringo Café is in a great location and they often ask: “How did you find this place? Did you use a real estate broker?” I searched for a location for over a year, considered literally hundreds of properties in Copacabana, Ipanema and Leblon and attempted to get a lease on four other locations before successfully closing a deal.
Throughout this process I did work with some brokers and my experience was mixed.
Several of the brokers or agents that I met were professional, seemed trustworthy, and were good sources of information about the market (e.g. rental prices, foot traffic, new developments).
Surprisingly, however, many were not so well informed about the specifics of the property they were representing. On several occasions I learned about major problems with a location after doing some basic due diligence and these were the types of obstacles that could prevent me from closing a deal.
For example:
• The property was not licensed for commercial use.
• The property owner would only sign a short term lease.
• The property was involved in a legal dispute that could delay a new lease.
I was told that brokers in Rio typically get paid by the property owner and only then if the deal is signed and sealed. With compensation dependent on closing a deal, I would expect brokers to perform enough diligence to confirm a deal can actually be done, but in my experience this was not always the case.
In fairness to brokers, I suspect that some property owners may not readily disclose information that could potentially derail a deal, but while I never felt intentionally misled by a broker, I determined that it was best to depend on my own due diligence when I was serious about a property.
Working with brokers was a valuable part of my experience in finding a location. With their help I developed a strong understanding of the market, learned about typical deal terms and in some cases heard about a property before it was advertised publicly. If you are trying to lease a location it is likely you will work with a broker at some point in the process. My main advice is to do your own background checks and research first and foremost, and use a good lawyer or accountant to negotiate and close a deal.
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Sam Flowers is an American entrepreneur and owner of the Gringo Café, locted on Rua Barão da Torre 240, Loja A, Ipanema, Rio de Janeiro, [email protected], +55 (21) 3813.3972.