Open the door and toss me a parachute…

[Tom Matousek]

I have a unique problem solving/real estate opportunity that is a bit out of my comfort zone that is too enticing to pass up.

Through networking, I ran into someone who is in desperate need of a new commercial property lease. A light went off with the perfect property. Unfortunately, I’ve focused all my education towards residential, but the numbers make too much sense. So, I’m looking for some new tools and fast.

The business owner who wants to lease this property is in love with it, but didn’t want to make a low offer, so I did. They haven’t accepted or countered the offer yet, but I have room to move since it’s a 2% property at the current offer. If I can secure it, he’s is 100% on board to lease. The first challenge is we must secure this property in 21 days before he has to renew his old lease, or temporarily relocate. I kind of enjoy the fire under the deadline though.

Assuming I get an accepted offer, below is the order of operations I’m looking at now. I would like to complete this as efficient and effective as possible so please critique all the flaws in my plan.

• Find responsive realtor to assist with possible counter offer (I’ve learned I don’t enjoy the lack of formality with a dual agent.)
• If offer is accepted, create LLC
• Contact firm to structure lease agreement which goes into effect, if and when I become the owner.
• Agree on terms and sign document with business owner (Aiming for 3-5 year lease or term equal to investor loan.)
• Armed with agreement, finish discussing financing process with local bank.
• Investor pitch
• Locate temporary storage for business if needed.
• Complete loan process
• Closing, etc.

Other Details:

Offer on property 150k

Aprx lease amount: 3k

Initial offer made 32hrs ago through seller agent

Cons:

Not in the town in which I live.

In slight distress.

Finding a responsive realtor around here is like pulling teeth!

Unfamiliar with commercial REI

Pros:

Lessee willing to rehab part of the property

It’s the exact set up the lessee requires

Stable business lessee

If this one doesn’t work out he still needs to secure two more commercial properties regardless.

I can afford the mortgage if I eat ramen.

There’s a second retail unit to lease.

Yes, I know I'm putting the horse before the buggy but I like to get ahead and I'm learning. I'm new to REI and can't put a price on advice. I look forward to your critique. Let me have it!

[Tom Matousek]

@Jay Hinrichs

Thanks again for the advice. Assuming everything goes to plan, and the long term lease is secured, I intend to allocate 40% of the cash flow to a vacancy reserve and the other 40% into making the 2nd retail unit more marketable. Once I feel I have enough in reserve to survive the next cycle I may get a bit more aggressive with the rehab.