All Forum Posts by: Eric Odum

Are there Dollar General stores nearby?  If not, they are the first and most obvious alternative.  

Not going to lie. Usually, they are in tough areas and not easy to re-tenant with similar credit quality tenant.  

I want to see the financials of the tenant...it starts and ends, for me and most investors, on single tenant, single purpose buildings with how long has the tenant been in business and how likely are they to stay in business. Everything else (viability of location, cost to replace, CAP rate, etc) follows.

Typically, commercial reset rates are tied to the 10 year treasury. There is nothing you or your banker can do about those rates. Your deal might be too small, but that is the reason you see people using agency debt and HUD for Multifamily financing. Most of their offerings do not have recourse, reset provisions, renewals or balloons and amortize over a longer period....needless to say, this greatly reduces personal and interest rate risk.

Are you dealing with the owner directly?  Or an agent? I would just talk to the agent or owner and tell them your concerns and would they consider  leasing for a bit of time to allow you the opportunity to find a tenant.  I would ask the question b4 putting it in writing...they might see it as coming out of left field, if it is not explained first.  

Good point, @Chris Wood....I will add that min fee for architectural and engineering, if necessary, can be the same for 400 SF as it is for 5000 SF....tough to spread their fees out over 400 SF and have the space still make fiscal sense.  

@David Dorau, please get financials from that tenant.  You don't want a nasty surprise 6 months after you build out.  

what percentage of the property is the owner occupied piece? Would the seller consider doing a lease back?  Selling the property to you and leasing his space for X months to give you time to find someone to fill it? This is not an unusual request.  I am doing that with a deal I am working on right now. 

Maybe, if you don't understand how to value a property, you should team up.  Commercial loans are considerably different than residential.  Usually, buildings with paying tenants are not under duress unless the loan is up for renewal and for whatever reason, the borrower or property have issues that would prevent or limit a lender from continuing the loan.  Commercial loans can be easier to deal as an investor when in the foreclosure process, b/c often times the loans are portfolio loans at a local bank.  You can talk to the borrower and talk to the lender (if you work the angle of buying the note).  In residential, most of the time the property is handled by an asset manager that is near impossible to communicate with.  I have done deals on foreclosing properties both with the banker (buying the note) and the borrower (buying the property).  It can be just as simple as asking the borrower if they are interested in selling...frequently they will spill the beans as to what is going on and reasons for the situation might not be what you think it should be...or what might appear logical.  The lender might be anxious to sell the note as the relationship with the borrower has broken down and they want to purge.  Lots of angles here.  Figure out what you think it is worth as a property and as a note and make the calls.  

Look up the officers on NINETY THREE THIRTY SEVEN HORTON ST LLC and contact them directly. The State's Secretary should have the officer info and address.

More often than not, the occupant of the building is not the owner of the building.  

Not sure about your market, but in my market, if I asked a 400SF tenant to come out of pocket for 1 cent for buildout or for them to do any buildout on their own, they would run the opposite direction.  400 SF tenants are typically, really small operators and any unknowns regarding cost, workload, etc will send them running to the hills. 

Typically, we have a standard build out in mind with any property.  We estimate what we consider to be reasonable market  buildout and tell the potential tenant, "This is what we are willing to do.  If you need higher end or more buildout than standard, we need a lease to cover those costs, which typically includes longer terms and higher rates."  Again, 400 SF tenants tend to be really small operators and will just move on and try to find something built out that already suits their needs.  

The buildout allowance is based on returns....what is reasonable?  There is no set, standardized amount one allocates to allowance.  Each situation dictates its own parameters...cost of acquisition, how difficult it will be to find tenants for the space, functional obsolescence, etc  What I do know is there is a correlation between sophistication of the tenant and what variables they are willing to accept.  Smaller, mom and pop tenants, the kind that go in to 400 SF spaces are really tough...they typically do not have the financials for you to complete an expensive, non-standard buildout and hope they are going to pay you back through the lease.  When you try to push the additional risk/buildout on them, they know they don't have the experience, comfort level, time or money to accept the additional responsibility and risk, so they walk.  That is the paradox with small office tenants.