Deal or No Deal? Buying out business partners

[Account Closed]

Hi all,

Wanted to get your advice on whether I should buy out my business partners on a commercial building we own or just hold my current position and call it a day.

We own a building in downtown Orlando FL (3300 sq ft), good location, cosmetically renovated inside, new roof, etc. We bought the building in 2012 for $550K and made about $250K in renovations. We currently owe $340K on the loan and have roughly $40K in the bank. I "think" the building is probably worth $800-850K currently. 

The proposed deal would be that I pay each of them $150K and they are removed from the partnership and I become the sole owner. Additionally, I would pay off the remainder of the loan. So I would be out of pocket $600-650K ($300K to them and $340K to the loan + whatever money remains in the checking account).

We have an offer to lease the building out at $30/sq ft NNN, but they want some additional offices added. Also, I am not sure this deal is completely "solid" as of yet and the building has been on the market for lease for about 2-3 months. Here are the numbers on the office currently:

Mortgage: $2,900/monthly (I would be paying this off)
Property Taxes: $900/monthly (paid by tenant on triple net lease)
Insurance: $585/monthly (paid by tenant on triple net lease)
Sales Tax: 6% (paid by tenant on triple net lease)
Reserves: $750 (I recommend keeping at least this amount aside per month)
Lease Commission: 4-6% but likely 6% if working with outside broker. 6% would be another $510/monthly to account for although 50% of this payment is due upfront upon closing on the lease.
Misc.: Other misc fees such as Tax prep, accounting, licenses, pest control, etc. etc. $400/monthly

According to my calculations, I would have outgoing costs of roughly $1700 per month and my rental income would be $8200 per month. Also, I don't mind managing the property myself.

My question is, would you make this deal if you have cash on hand and would ideally like to bring in some passive rental income? Are there any other expenses or items I am overlooking?

I appreciate all thoughts,

Skip

[Joel Owens]

Why would you payoff the loan?? Is it a high interest rate??

The value is tied to the income of the property. If you lease up the other space you could cash out refi likely at 75% ltv with a larger value.

Why can't the lender just release the other partners off the loan and you preserve your cash??