Office Park Investment

[Mohammed Mallick]

Hello biggerpockets community,

I will be meeting with the current owner of an office park (5 units all occupied and paying rent) next week to discuss the possibility of me buying the property and becoming the new owner of the office park. So my question is what should I ask the current owner when we meet? 

thanks,

Mohammed Mallick

[Gerald Demers]

@Mohammed Mallick, first of all, well done on creating the opportunity.  

Do you have any experience with commercial?  If you don't, and it doesn't sound like you do, that does not mean this is an opportunity you should step away from, but maybe get some local help with it.

The value of a commercial property is based largely on income but also the types of leases each tenant has can be a huge factor.  You will see and hear terms like net, triple net, etc.  These have a lot to deal with who is paying utilities, taxes, making repairs, general maintenance like parking lots, garbage.  Some leases have profit sharing components where the tenant may pay less per month but the property owner can get a share of the profits.  

So, questions to ask:

• What is the total square footage?  What is the sq footage of common areas, and those of each tenant.
• You have basic building questions overall: age of the roof, type of roof, other major systems, you will want to see a history of maintenance or major repairs.  
• Ask questions so you are clear what are management responsibilities and what are individual tenant's.  Does each tenant have the same responsibilities or are they different?  
• You need to see all the numbers from them and you need to look at their books. Have your account/CPA help you with this.  
• Of each lease, what are the terms, when does the lease expire; do they all expire soon or at or near the same time?  If they do, you can suddenly find yourself with a vacant building.  How strong is each of the businesses; are they struggling or successful?  It does not matter what type of lease you have, if they go out of business, you have no rental income from them.  
• Of the leases, are any expiring while you are looking at the property?  If yes, you want to see that lease before it's finalized.  You do not want the present owner signing a sweetheart lease that you have to but cannot honor once you become the owner.  

There are so many things to look at but know you have time to look at things,  Get the property under contract and give yourself and your team sufficient time to analyze the numbers and other info and then find someone with commercial experience to help you.  

Gerald Demers