All Forum Posts by: Joseph Parker

@Mike Dymski from what the broker is saying (and he’s related to the seller), the main concern is his age and health and not being able to fully the realize the “fruits of his labor” by taking the seller financing option.

Strange thing is he received a cash offer for slightly less than my purchase price offer shortly before I made mine, and he didn’t even consider that cash offer. Now he gets another which can’t be for much more and wants me to back out. He’s owned the property 14 years so will have depreciation recapture plus capital gains.

Received multiple messages from the broker this afternoon saying he’s sorry to put me in this situation, that the seller really wants the cash offer and even sending me other listings that he thinks I’d like if I agree to release the contract on this deal. 

@Sean Carroll it would still cash flow some, considering those two tenants  combined only make up about 24% of total rents, but obviously not as nicely as if it were full which was what I initially expected. Other three units leased until spring/summer 2020. Smaller property with one national tenant, other mom & pop businesses.

I’ll also be paying principle down quickly, nearly double the amount annually as I would have with bank financing due to low interest rate (2.5%) that we agreed on with seller financing. So still plenty of positives, but it’s just thrown me off with the vacancy possibilities combined with my conservative nature and given the fact it’s my first office/retail deal.

@Bjorn Ahlblad thinking about doing that Monday, just wasn’t sure if that’s professional or appropriate to do since they aren’t technically my tenants.

Also questioning if those tenants really do intend to leave or if it’s a “scare tactic” to get me to release the contract...

Went under contract on a 5-unit office/retail property this past week. Was on the market for a year, few offers made but none good enough for seller to accept.

Was able to talk seller into a lease with option (seller financing) at a good price and very low interest rate that banks can’t touch.

This is a turnkey property, all five units occupied but two leases expiring soon. I was told both of those tenants intend to renew so I’d be taking ownership fully leased.

Today, out of nowhere the broker is telling me one of those tenants does not intend to renew and another is probably leaving as well (both expire end of April). Also informed me they received a cash offer that the seller is very interested in and kind of what he wanted all along versus seller financing due to his age and health. They are asking for a mutual release from the contract so he can take the cash offer.

Obviously it’s up to me to decide what to do since we’re under contract. Seems that they’re trying hard to get me to back out of the deal. I hate the thought of taking ownership with two vacancies but I can also get new, longer leases in there at market rates. Just always a risk not knowing how long I’ll have to float those vacancies.

Really wasn’t expecting any of this and kind of blindsided today, expecting to close around April 13th.  I know it’s my decision ultimately, but I guess I’m just looking for advice or opinions...? 

This is my first commercial office/retail deal, in a great location and I don’t want to screw it up. I liked the idea of a fully leased property, and the idea of two vacancies from the start are kind of scaring me a little.

@Joel Owens thank you, and that is what I had assumed. 

My next question would be this - do these companies choose their own sites based on their own studies, or do those "site submission" forms on the company's website ever lead to actual interest and/or future development?

I've created my own "flyer" with a map, demographics, traffic, etc., which also displays the local competitors and generators around my property, but is that even worth sending out to those chains who I think would greatly benefit from a store on my property? I have a handful who I can nearly guarantee would experience lots of traffic and business (more than their other location/s in town), but it's not easy to find the appropriate contacts to advertise this space to.

I was discussing this with another investor this week, and thought I'd ask the BP community...

Do NNN corporations (fast food chains for example), typically lean towards looking for empty land, an existing vacant building or will they simply bulldoze and clear out any structure/s on a lot that meets their criteria for site development?

@Joel Owens do you have an opinion based on your experiences?

@Antoine Martel True - I guess there are pros and cons to each strategy. It is in a good location and I've been told by local leasing agents that I shouldn't have a problem getting vacancies filled quickly there, so I'll try not to worry about that so much. Thanks!

@Antoine Martel That's where I'm stuck - obviously I'd love to be vacancy-free for the next two years and build up/save the cash flow, but at the same time, I'd have all 5 leases expiring between April 8th and June 30th, 2020. While it's not likely that multiple would choose not to renew at that time (but a lot can happen in two years!), I still want to avoid that potential headache if possible.

I'm currently under contract on a smaller, 5-unit commercial office/retail property. 4 of the 5 leases expire in April/May of this year, and one of the contingencies of the sale closing is that 3 of those 4 soon-expiring leases renew for at least one year (I have full negotiating power over those leases).

All of those tenants have showed no intention to vacate, and are happy with their current situations.

I've seen/read in many places that it is best practice to stagger leases as much as possible in order to avoid the possibility of multiple tenants moving out around the same time, leaving numerous units to be turned over.

Would it best for me to try and get 2 of the 4 tenants to renew a two-year lease (which they've done in past) and the other two tenants agree to a one-year or three-year lease (both have been year-to-year in past ). That way I'd have staggered years and less risk of multiple vacancies at the same time...? 

These are mainly mom and pop businesses, so any longer would probably not be likely. A couple of the lease rates are below market rent/sq ft, so while I'd like to bump those up a small amount as they've never been raised, I also don't want to immediately have a bad reputation with those tenants.

Suggestions or past experiences?