All Forum Posts by: Bharath Raj

@Michael Pittman I have requested pricing from a contractor that I already know about, but I was just wanting more

I am looking for recommendations for a good GC in the Houston area who can build out a shell space into a office. I already have plans from the architect. 

@Alexander Felice. Being a wanna landlord has been harder than I thought. I appreciate your candor. 

So, the background check on this tenant was concerning. It had 6 collections and 1 eviction. Tenant' broker sent a letter with a court letter that dismissed the eviction which stated "dismissed for want of prosecution". This tenant also wrote me a lengthy letter touting her long history of community service the area (~12 years) and offered to add a contingency clause of 6 m to 12 m, which would apparently allow me to terminate the lease. I am not satisfied with this. While I continue to search for a suitable candidate, I was thinking if there is any way to work with her.

Here is what I am thinking.

I have a modified proposal to Dr X. These are non negotiable terms from my end. Here are the salient changes that would make me consider leasing the space to her:

1) I will be considering leasing out only the 3200 sq ft of previously build out space. I am no longer leasing out the shell space. If Dr X finishes out the first 5 years without any concerns, then I may be open to giving Dr X more space. (previously, Dr X was given 3600 sq ft of space with all of the 1900 sq ft of shell space).

2) Dr X will be responsible for getting her own architect and certified contractors to get the build out/modifications completed. She will need to provide proof of funds. A letter from banker extending credit to complete build out is acceptable. The landlord will reserve the right to accept/reject proposed floor plans/choice of contractors. The landlord will not contribute funds towards build out. (previously, the landlord was going to perform a significant chunk of build out of 1900 sq ft shell, with cost estimates ~$80K).

3) The base rent will now be $13.50 for 1st year with 3% increases every year. (was $11.50 for first 2 years, with 3% increase/2 years)

4) Security deposit will be 3 months of rent collected upfront. (was 1 month of rent previously)

5) The start date of the lease will be 6/1/2018. (was upon completion of landlord part of build out previously)

I would appreciate any input. 

My PM is saying that the lockout was entirely legal and they consulted with their attorney. The office is not trashed and the tenant has moved out with all her possessions. Eviction proceedings have been filed, but I have decided to not pursue it. Instead, I have asked my PM to draft a document that waives her balance & terminates her lease with immediate effect. I agree that this may not be worth the headache & the possibility of the courts viewing this differently. 

@Carl Fischer I insisted on the tenant completing my due diligence application. I used smartmove.com. Her credit score was barely 500 with multiple collections. She also had a eviction in late 2017. I am so glad that I listened to your advice & pushed my broker. Thank you. I think I should fire my broker (again by listening to your advice), since he cost me a few thousand dollars and several hours of my time, for a poor choice of tenant. I did sign a 12 month contract with my broker for him to show the building. How can I fire him? Does a simple email suffice?

My property manager locked out a tenant and started eviction proceedings, since the tenant was behind on rent repeatedly. The tenant had ~4 years left on the lease. Tenant moved out all her belongings, and is requesting that we stop eviction proceedings. She is also requesting that we waive her balance. I am okay with not having the eviction record follow her. The balance she owes is not too big. Any thoughts?

I am negotiating a lease with a physician for my medical office building. This physician is a sole proprietor. I am adding a personal guarantee into the lease. The lease is being drafted by a attorney. My broker said that they usually don't do credit checks, and instead rely on P & L/balance sheets for the last 3 years. I was a little surprised. I would assume that you need 3 years of tax returns also, if you rely on a self report of P & L/balance sheets. I would appreciate some feedback on due diligence in this scenario. 

The tenant is a physician who has been in the community for ~12 years. Her office had plumbing issues and mold, which led her prior landlord to let her off her lease. She is looking for another location close by, & there are literally no medical office spaces available in this park of town. She doesn’t have any other locations, & I haven’t seen her finances. I haven’t been able to get a tenant into my space since I bought it. My plan B was to complete the white box part of the build out to attract more activity.

Here is a update on my lease negotiation. Please let me know your thoughts

1) Base rent: $11.50/sq ft for months 1 to 24, then $11.90 from 25 to 48, then $12.30 for year 5. 

2) NNN of $6.86/sq ft

3) 3% annual cap over base year 2018 controllable expenses. Excludes taxes, insurance & CAM

4) Build out: Landlord will provide white box, complete 6 offices/exam rooms with plumbing, 2 ADA restrooms & 1 break room. Tenant to pay for other costs.

5) Security deposit: One month' rent

6) Landlord will bill tenant for water and electricity.

7) Renewal rate: Based on market rate and will need to be negotiated at the time. Univ of Houston has to plans to build a medical school in this area. I am hoping that it would drive up rents. 

8) Tenant to pay for signage. Has to be approved by landlord.

9) Tenant to provide P & L, & balance sheets for 2015 to 2018. I want to ask for a personal guarantee. 

Please provide feedback on this, especially with the build out. I am not sure how much this will cost me. As a reminder, the shell space is 1900 sq ft. The remaining ~1700 sq ft is build out, but will need some modifications, based on the agreed upon design. The tenant is yet to provide it to me. I was running my numbers, assuming $150000 for the build out. At that cost, I will still make a COC of 10% & cashflow ~$1900.