All Forum Posts by: Bennet Sebastian

The only way anyone would buy this deal is if the tenant was super strong and there was sufficient lease term left for the market rates to catch up by the time the leases expire. It's very unlikely you would be able to sell this for what you paid for it with only three years remaining. A potential buyer performing a simple discounted cash flow analysis would take into consideration the likely income drop at lease expiration and will result in a much lower net present value.

In my opinion this is a pump and dump offering and you should move on. 

You are wise to analyze this deal very closely. Most doctors want to be close to a patient population that has $$$ to spend on their services. If the median income in the area is $50k this would not be considered a top tier market for them. I think you would be in a world of hurt when these leases expire and you have to fill the vacancies at market rent.  

Sounds like the $3,100 a gross rent before operating expenses. If so you are definitely not a 10% cap. 

At $350,000 you are paying $157/sf and will be getting $13/sf in rent. That's an 8% cap rate which is OK if the property was already fully leased with a long term credit tenant. As vacant property you need to factor in a vacancy period, tenant improvements, rent abatement period and leasing commissions. I wouldn't take it for less than a 10% cap or $130/sf which would be $288,000. If broker laughs at that offer just move on to the next deal. 

The simplest way is to call current competitive spaces for lease and find out what they are asking. You should have a fairly accurate estimate of what you could expect to lease it for. If it were me I would discount it by 10% to be safe. 

PM me your contact information and I’ll give you my spreadsheet and help you run the numbers. 

All of the above. Do you have a target internal rate of return or IRR? That's what most commercial investors will use as a benchmark to decide if an investment will work for them. For me the target is 20% using conservative assumptions.

I’m curious to know if you already have a tenant base when you target these centers for acquisition or are you going into them with no prior commitments.

I do know of one developer in my market that created these medical “villages” throughout the area but they also had ownership interests in some of the practices that would be tenants in these centers thus reducing their vacancy risk. 

Thanks! 

I was wondering how the mail situation would work, that seems like a good solution. I was afraid I would need a staff member to collect and distribute the mail.  

What about ideal suite size and demographics? The building I’m looking at has twelve large (350-400sf) offices and eight small (100-150sf) office. Do you find it easier to lease one size more than another. Do you charge the same rate/sf or lower it on the larger offices? 

Most importantly are the demographics. What are some key metrics in determining demand for mini suites? Population, income, etc?

Thabks 

@Eric Weireter

No cult meeting place?