How should I structure an offer on this dentist office?
All:
I'm considering making an offer on a commercial building that is leased to a dental office and would love some advice on how to structure.
Here's some info :
- It has been leased by the dentist for the last 12+ years
- The lease is month to month
- The dentist is paying $900/month
- The market rate on this building is ~$1800/month
- Property is listed for 175k but can be bought for 150k
- If it were vacant it would be worth ~150k
- The owner has had it listed for over 1 year
- The owner does not owe anything on the building
- After taxes/insurance I estimate the owner only nets $500/month at most (owner is responsible for repairs)
- Owner seems content with the current rent amount or selling and cashing out
It's my belief that the dentist does not try and sign a long term lease because the rent is so cheap. He simply doesn't want to bring up the issue. I've been told that moving dental equipment is pretty expensive and moving offices would be quite expensive. Although this is not a huge home run by any means, I would be interested in getting this property if I could get the dentist to sign a long term lease at market rate while it is under contract and before I close on it.
However, I am concerned that if I approach the dentist with this new lease that he may just go to the owner and work out a higher rate and cut me out of it. I'm also only interested in purchasing if I can get the new lease while under contract. The value to me in this deal is mostly in the lease/tenant.
I'm not sure I can achieve this but would love to hear suggestions.