Advice on a Rent to Own Commercial Property

[Michelle P Stafford]

Hello all,

I'd like some advice from the group of experienced investors. Here's my situation in short details:

Bought a commercial property for $699K in 2019 through a 1031 exchange which cash flowed beautifully until late 2022 when the tenant bankrupted and moved out. 

Property has been on the market to sell or lease every since (and clearly bleeding cash!)

Now: Interested tenant  who would like to purchase the building but unable to come up with a loan. Last month they stated they had secured an SBA loan but that fell through. Would like me to carry the loan which I would be open to but my bank is not ok with this (I owe approx. $300K as I put a hefty amount down through that 1031 exchange).

Current offer on the table proposed by my broker:

$600K Purchase price

7 year lease with option to purchase within 3 years for an amount equal to $600K less what they would have otherwise paid in principal under under a 7% loan for the same period). 

They pay monthly rent that’s equal to a 25 year loan of the entire $600K at 7%. ($4,241)

No money down. 

According to him the Market Rent = $19.43 NNN and after 3 years if they do not purchase I could sell it.

Thoughts? Ideas? Is this crazy or a good idea considering it's been on the market for a year with only a couple nibbles? All responses appreciated!
TIA

[Melanie P.]

I would offer them a lease and invite them to make an offer on the property anytime in the future when they are actually in a position to buy it. Make sure you carefully evaluate the credit quality of this tenant prior to leasing to them. I'm feeling red flags here.