Salon Suites Commercial Space

6 Replies

Hey BP - so a friend of mine who is a hair stylist was recently speaking with a client who mentioned that they are thinking about selling a commercial space. They have been building it out (i.e. not currently in use) to use as a salon suite facility in which people like hair stylists, nail technicians, etc can rent out their own private "suite" to run their business out of. My friend knows of my interest in real estate and she has been wanting to open a business like this so she approached me about partnering up. The seller has said that he would do some kind of lease option until we are ready/able to buy the real estate. I don't even know where to start with this and if it's even within the scope of what my goals are from an REI perspective... I would LOVE to own commercial real estate, but don't necessarily want to start a "salon suites" business. It's kind of a gray area though, because these are technically tenants.. ?... Or should it really be organized with my friend starting her business and leasing from this seller until she can buy? Not sure I'm needed in this equation.

Anyway, I'm new to all of this. I'm like a year in to landlording two sfh so this is a little out of my league, BUT it seems like a decent opportunity being that it's off-market and we have a relationship with the seller who is basically ok with letting us get in with not a lot of up front cash. We still have to get the numbers/details to know if this is even a deal.

But, with this high-level description of the situation how would you proceed if you were me? Appreciate any insight.

See if you can talk to a local commercial retail attorney. Maybe take them out to lunch or dinner on you. Some will do free consult or a cheaper phone call and some will not.

@Jessica G.

If not ready to purchase for one reason or another, you and your friend could look into leasing with options to buy (ROFR and ROFO). Of course these don't guarantee a purchase if landlord decided not to sell, it just secures your right to offer upon if they do, and provides you the right to purchase at the offer price they would accept elsewhere.

What would be your contribution to the partnership? Would it be capital or assuming an operational role in the business? It sounds like she may be looking for a business partner to help her operate the business of the salon suites, but it also sounds like that's not something you're interested in. If it was because you were brining a cash investment to acquire the space, then you should then figure out if this kind of investment meets your passive investment criteria, assuming you'd take a passive role. I think she should be able to furnish a proforma under which the income from the business is projected and how it would pay for the business operating costs, service the debt (assuming there is debt), pay for the real estate, and ultimately pay you. Possibly even more importantly, I think you should figure out if you and your friend have similar goals and philosophies on business and money to make sure that you would make good business partners.