To lease, or not to lease...that is the questions.

[Etienne Turner]

Hey BiggerPocket Members,

I need some advice and direction. I'm very new to real estate and only have one deal under my belt. I have recently purchased a shopping plaza back in November, and I’m trying to get all my tenants all locked up. I currently have one last unit to get under lease. I have been marketing this unit for about a month and a half and have had only one serious inquiry. I need some advise on this potential tenant.

The last unit was previously leased out to a pharmacy for several years. I recently met this lovely couple, which also have an existing pharmacy business, and would like to lease out my last unit. The problem I face is that they would like to have substantial rent reduction for the first 6 months. Apparently, before a pharmacy can begin doing business, their new space needs to be filed and approved. This period typically takes around 3-6 months. Below is what I offered and what they countered.

I offered:

2-Year Lease with sales tax included in rent

2016

• January: $0
• February: $428
• March: $535
• April - September: $1,605
• October - November: $1,712
• December: $1,819

2017

• January - December: $1,926

They came back with a 3-year lease with no sales tax

2016

• Jan - Feb: $0
• March - April: $400
• May - June: $500
• July - Dec: $1400

2017

• Jan - Dec: $1600

2018

• Jan - Dec: $1800

I spoke with them today, and they seem like great people. They seem like they would be a great tenant to work with and they plan on staying at the shopping plaza until they retire.

Here’s my rational to taking the deal:

• I like the both of them very much
• I believe they would be great tenants to have (no headaches)
• I can lock that unit up for several years for consistent cash flow

My rational for not taking the deal:

• Substantial rent reduction for the first 6 months
• Overall under market rent payment

My question to you members is it worth taking the reduced rent reduction for the first 6 months and have overall cheaper rent per square foot in order to lock up cash flow and have, from what I believe, a great tenant?