compatible tenants?

Question

hi bp

How are you?

Thanks as always in advance.

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So I have a mix use building.

I have put in a restaurant business (new business- good food and rating so far).

Now I have a few prospects for the other unit.

How important in the tenants compatibility??

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I have a martial arts school that does kids business between after school to dinner hours. 3-8pm and adult/private in the ams.

And maybe a used furniture store.

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Assuming for arguement sake they are equal. Same build out cost (vanilla space and tenant outfit own needs)

Rent very similar terms, $ and years

Both existing business needing different space. Expand (furniture), move (martial arts)

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My thinking is the martial arts, they bring more constant flow of ppl to the area. And will generate more business for the restaurant. Kids, exercise and dinner hours. Bored moms waiting for kids....

Mutual benefit.. Both tenant will rent longer????

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My husband's thinking is $$$ whatever bring more CF. Best terms

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I'm afraid that if furniture comes in, no added benefit. If he goes, restaurant may go too?? Restaurant is doing steady business. Just started, but any added free Mktg will help ;)

Your thoughts???

Jennifer Lee · Answer

@Joel Owens

thank you!! I will ask for his financials :) I'm so glad I posted today. You are always a wealth of knowledge my friend. Sometimes more helpful than my mentor/broker. I'll definitely update this post as we progress.

U have helped me through this whole process. In case you weren't aware :) from analyzing the purchase of this building to now :)

Joel Owens · Answer

Is the martial arts tenant a proven operator?? Do they have other locations already?? It's good if they have a track record of success.

If they have other stores you can see what the average sales volume is annually. You want to keep rents to 10% or below of gross annual sales as a basic guideline.

Furniture stores generally go in and out because people buy cheaper online or at the IKEA type huge places. They only survive generally if they have unique custom stuff at a great price that people can't get elsewhere.

Jennifer Lee · Answer

wow can't believe it took 5 months!

but lease negotiated, 5 units mixed used bldg fully rented. just need to complete vanilla box and move dojo in.

Thx for helping me through this. 2 yrs owning,  complete rehab, 15% cap, 2 commercial, 3 residential tenant. only 1 original from purchase (low rent).

long term buy hold!

Joel Owens · Answer

Glad I could help Jennifer.

All of us help by sharing knowledge and experiences.

I learn everyday.

Joel Owens · Answer

I don't care about 1983. It's what has the business been doing lately??

He could have done 200,000 profit for 20 years and the past 5 barely squeak by. It's okay if he has a lot of cash saved up. If he doesn't have much cash saved up then it's a risk. Get others for security on the guarantee.

Used furniture store attracts a junkie crowd so I wouldn't be excited about that type of tenant.

Jennifer Lee · Answer

@Joel Owens we haven't gone into that much detail. But he been business since 1983. Moved 2 times. Our unit will bring him full circle. Started and grew up in our area

Reason for moving is current space too big, and area getting depressed.

I will look into his credit and credentials.

Furniture: this will be his 3rd branch. Has original in south, realizing doing more business in north (our area) and need to expand. Used furniture

Joel Owens · Answer

What is his rank in degree?? Any other schools?? Being a martial artist and a successful business owner are two very different things.

What is his liquidity and net worth?? Have you seen his personal financial statement??

If he is weak financially try to get the master or head of the organization who might be more liquid and have more net worth to guarantee the lease.

Jennifer Lee · Answer

@Joel Owens

dojo?? Is that different. They do kids 4-8 and private/adult in between.

He sees himself running 1 class. Space is 1500sqft

Jennifer Lee · Answer

wow good point.

Joel: proven business. Current area depressed looking for a better neighborhood (ours is ideal). And Thx for 10% tip. He will give me his projection. He currently rents 9000sqft. Only use 1/3. Our unit is slightly smaller but location he will trade off.

He projects a loss of business of 30% during transfer. Its 2 municipality over. Better school district.

@john, public Parking, free. Restaurant is lunch dinner sushi/Asian so fits martial art theme.

Joel Owens · Answer

Jennifer I know the martial arts school model very well. I am a 3rd degree black belt and I have studied various arts for decades.

You need to look at what is the mix of adults to kids ratio. Some schools like Taekwondo tend to have a lot more kids. This eats up parking especially on testing days. You have the parents, grandparents, friends, etc. all wanting to see Mikey do his thing. So for one kid there might be 2 to 3 cars. If you have 40 kids testing you see where this is going.

Adults just generally their kids or significant other are watching the testing. Usually the parents might not even watch the regular classes but might drop off the kids and come back.

compatible tenants?

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