Hi Folk, 

My name is Brian. I'm a small business owner (gym) looking to buy a property to open my second gym in.  The owner is sort of open to a lease to own situation, but she doesn't want to sell right now as she wants to 1031 the property and there aren't great alternatives for her to buy right now.  I have little-to-no experience in purchasing commercial property.  What would be a strong offer?  (She has said through her property manager that she would be looking for something like $550,000 for the building.  Do I offer her 2-3 years at or above the lease price she is requesting with a pre-agreed upon price?  How do I even structure an offer when I'm reliant on her for financing it?  I have had one mortgage broker say there's no way a start up gym (my first gym is in a different state) would qualify for a commercial mortgage right now given the covid restrictions on gyms, etc.  

Any ideas for me? 

P.S. The property is in Colorado Springs. I currently run a gym in Boston. 

@Brian Buell . Hey Brian! I am a Boston based real estate investor looking to get into the Colorado Springs market. Let’s talk! Sent you an invite to connect...

HI @Brian Buell let me just start by saying I'm not in commercial real estate but we work with lots of investors on apartment buildings. I think you might be over complicating it. I think first you negotiate the lease for the space first and then before you sign it you negotiate right to purchase the building at a certain $ amount in a certain amount of time. They shouldn't really be tied together since alot can happen over the next 2-3 years and you don't want your option to purchase to cause a problem with your lease. For example if you decide not to execute your option to buy the property after the 2-3 year period you wouldn't want her to terminate your lease to make room for a potential buyer causing you to have to find a new spot and move your customer base. Your lease and the option to purchase should be 2 different things and you should try to keep them as separate as possible. 

Missouri Realtors have a document called "Option to Purchase Real Estate." I have used this document for a scenario similar to what I think you're describing. 

Here's the scenario...Buyer "A" approached me about a building that I had listed for sale. They were interested in purchasing the building with the plan of putting an antique store in it. However, since this was going to be a new business they wanted to establish/vet the business itself in order to make sure it would work before sinking money into the purchase of the building as well (essentially they wanted to rent it for a period of time & then ideally buy it if things went well). So, they paid $x to the seller for the "option" to purchase the property. Per the agreement, the seller took the property off the market & rented it to them for a predetermined period of time (1 year). The purchase price was included in the document as part of the arrangement (Buyer "A" offered list price so the seller would be more inclined to accept the arrangement). They paid rent monthly for 1 year then decided to exercise their right & purchased the property.

If Buyer "A" had decided that they didn't want to purchase the property at the end of the predetermined time (1 year) the seller could have put the property back on the market & sold it to any other buyer. The seller would have kept the fee initially paid for the "option" to purchase the building & all monthly rents, but Buyer "A" could have walked away with no further ties to the property or financial obligations to the deal.

Hopefully I've explained my scenario in a way that makes sense. If you have questions feel free to reach out.