All Forum Posts by: Jason J.

Thanks for the responses so far, much appreciated. 

I'm wondering if anyone has seen a for lease listing go for above asking price? Like with the current housing market... where the buyers submit offers over asking price. We may have 5 or more businesses who are qualified and interested in making offers. Should we ask them to submit their best offer by a certain date? Or is that generally unheard of in commercial lease situations?

Side note, there are no tenant improvements involved. The space is a flex space with office and bathrooms.

Hello,

I am looking for advice on a commercial property. I listed it for lease a few days ago and have a huge interest in the space. I can start showing the space in a few days. I will likely have multiple people who want to lease it. This is a commercial space, not residential.

We plan on getting information on each business and narrowing the list down to those who seem the most reputable. 

How do we go about deciding who to lease the space to? 

1. Is it common to have all of the potential tenants submit offers to you? Should we look at what they are willing to offer above listing price and how long they are willing to sign?

2. Or do you go with the first person who shows up who is willing to sign the lease?

Any other advice is greatly appreciated. If you were in this situation, would love to hear your story and how you handled it.

Right now, the space is in high demand due to no inventory on the market in that particular type and size of property.

Hi Francis, I do have financing approved so that is not an issue. The property has below market rents. I intend on getting new leases signed with the existing tenants and/or placing new tenants. The purchase agreement and title company search should show any liens.

Buildings built in last 20 years, so maintenance not a huge worry. I know the property very well.

Tenants subletting... If a tenant is subletting to another tenant, does that affect me?

My main concerns are if there is a lease, even if expired, that gives a tenant some ongoing right. Or if I'm not able to evict a tenant because of a lease in place (that I haven't reviewed because the seller can't find it or chose not to share it with me). Is there something that I can have the seller sign that gives them all liability for something like that?

I think what I need is an Estoppel Certificate from each tenant without a lease... or something similar?

I'm under contract for a commercial property and the seller is very disorganized. They are unable to locate some of the tenant leases for the property. The tenants they can not find the leases for... the seller is stating that their terms are expired and they are month-to-month tenants. Some have been there for 10+ years.

The leases he did locate... those leases are very rudimentary and have no provisions for assignment of the lease with sale of property. AKA no "SUCCESSOR AND ASSIGNS" clause.

The property has commercial tenants only (no residential).

Any advice on how to proceed?

If you were purchasing 3 buildings, each on its own unique parcel... all 3 buildings/parcels are next to each other and each is worth approx $600k. Would you use 3 separate LLCs for liability reasons?

I had a question about being a "Qualified Real Estate Professional". I'd like to use Cost Segregation Studies on my commercial properties to offset income from my businesses. For 2021, I started to accurately log all of my landlord activity hours on a daily basis. I'm hoping to have enough hours by the end of the year to meet the requirements of being a "Qualified Real Estate Professional". I'd like to be able to do cost segregation studies on the properties to find a large amount of bonus depreciation to take as a large tax deduction against my 2021 income (including income from my businesses). From what I understand, this is possible by classifying my real estate income/loss as active instead of passive.

My question is: If I end up having enough hours and being classified as a "Qualified Real Estate Professional" for 2021 (thus claiming the bonus depreciation from the Cost Seg Studies), do I have to continue to meet the requirements of being a "Qualified Real Estate Professional" in 2022 and beyond? 

A little back story... I've been in commercial real estate for about 3 years. I plan on focusing a lot of my time in the next few years purchasing / developing commercial properties. In the long term (several years down the road with more properties), I plan on hiring a full time property manager to take over my position. Basically I'm not sure that if another bigger business opportunity would come down the road, that I'd want to spend less time on managing the properties.

So do I need it just for the years I'm claiming the big deductions, or does it need to be for the remainder of the time I'm claiming depreciation on the property? 

Hello,

I have a signed LOI in place on a small retail strip in a core downtown area located in Minnesota. I'm in my due diligence phase and have been talking with environmental companies regarding a phase 1. One of the environmental companies I consulted with informed me that they recently did a Phase 1 and Phase 2 on a property located approximately 250 feet from the subject property. He was nice enough to forward me the results from the reports.

The phase 2 involved soil samples from various areas in a radius from the contaminated property. The contaminated property has been used as a dry cleaners for the past 30 years or so. I'm now learning how nasty the dry cleaning business can be.

As part of the soil samples, they took 1 soil boring on the subject property. The environmental company stated that there were no soil vapor issues present on the subject property but there were low levels of contamination in the ground water. The subject property is in the city core and all properties within at least a 3 mile radius I would assume have city water and sewer services.

The subject property is a class A property built in the early 2000's in mint condition with national tenants and good leases with at least 5 years left on them. The property is in a medium size city (100k+ population) and is one of the nicest properties of the downtown core for both location and parking ability.

The subject property tested for low levels of Trichloroethylene. Specifically 1.1 (shallow) and 1.9 (deep) ug/l. MN department of health lists 0.4 ug/l as a risk level. It appears the EPA lists 5 ug/l as a risk level.

I'm trying to assess the risk of purchasing the property. My 3 concerns are:

1. Being liable for cleanup/remediation of the property

2. Being liable for suits from a tenant

3. Being able to resell the property

Should I proceed with the property purchase? Phase 1 is needed I assume. Should I do a phase 2? Should the existing owner share some of the cost burden? Or should I walk away?

All advice is greatly appreciated! This would be my second commercial property (I own a multi tenant industrial that had a clean environmental phase 1).