Paying tenants for rent increase

[Igor Messano]

Hi everyone,

Thought came to mind and was wondering if this is ever done, and if so what is the good and the bad. Let's say I have a commercial property with a couple of small retail locations (300 sqft) where rents are significantly below market. Is paying a tenant for the right to increase rent a thing? I know you can pay to buyout the lease. But if a tenant is a good tenant has anyone ever though about buying the lease but essentially signing a new lease with the same tenant for market rent?

The thought is I could keep the same good tenant instead of gambling on an unknown tenant, the tenant gets continuity to their business instead of finding a new place for likely similar rent, and I get to increase my NOI for sale or refinance purposes.

[Joel Owens]

Seasoned investors are going to look at a retail property or other assets classes and as part of DD look at what is reasonable as a history for a property and how to validate the credibility of rents and others components of a lease. Lenders will usually do the same as part of the vetting process for a property.

Investors long term in the business that are property owners want to build a solid reputation of above board dealings. I know of a developer that builds shoddy retail centers and slams in single unit unknown brand tenants. He then sells mainly to Canadians buying in the U.S. at 50% down so the lenders will not ask much questions for underwriting. I avoid their company like the plague and won't try and do a deal with them. I have a blacklist of poor performing commercial attorneys, developers, property management companies, owners, listing brokers that I want to avoid at all costs if possible doing a deal with.

The only time is if they had an incredible property for my client to buy would have to put in extra protections in place to safeguard sleezy tactics.