@Joel Owens
Thanks so much for taking the time to write such a long response and sharing your wisdom/knowledge. I really really appreciate it.
Oh, and thanks for the referral to Andy the commercial lawyer out of Houston. I contacted him last week and like the guy. He is reviewing a lease for us as of now. I did tell him you referred me to him.
3rd degree black belt? Wow. My son took Karate a while back and I have so much respect for the instructors who have 2nd degree black belt in Karate. I joined them in practice sometimes and liked it. They are retired police instructors. Problem is, when they showed us those deadly moves like that poke in the neck, or the eyes, or don't yank the bad guys in the head because that will kill them, guess what I want to do if I have to fight the bad guys? :) So we stopped because you can't teach and show me those moves and tell me not to use them!
Looks like we share the same philosophy on many things. I also don't want a complicated life. I enjoy simple things in life and do think beauty is in the simplicity. Don't know if you play tennis but my son does and I pick it up after him and the coach and I keep telling him keep it simple, no need to complicate your swings and he does gets it. He is at a point now where he can see how keeping it simple really works beautifully, effectively, and efficiently. Not only his form/fundamental doesn't change (as with other kids it can change after with just 1 day without practice) but it is so consistent it also holds up very well under pressure instead of cracking. His practicing partner is another story, not nearly as good but looks up to Rafael Nadal and therefore always does those extra weird things that drive us crazy. And, it doesn't work!
Ok, enough with tennis, back to commercial real estate. We (as in my brother) bought that retail (multi-tenants) last year before I knew/heard about you or BP. It's about 15,000 sqt and the gym space is about 2300 sqt. It's outside of Houston, about 45 minutes northwest of Houston. This retail was built in 2018, on the busiest street of that city, and the busiest section of the street with many many retails, all are doing well. My brother is in Vietnam and wants to invest here so last year we started and bought that and hire his nephew-in-law to be property manager. I only help out here and there since I was having a 9-5 job as a programmer working for an HR outsourcing company and was working on Federal Reserve account. That company has been trying to outsource work to India for years, nothing new there. The thing is, being on Federal Reserve account make people think I am safe, and I was, until this February. I got laid off at end of February right before covid-19 hit Houston. And my friends have been asking if I am going to brush up my resume and look for job. I told them after working on Federal Reserve account for almost 20 years and dealt with everything they had thrown at us I have just had enough. It's about time for me to move on something new and better. Lately for about a year now each day I woke up dreaded how much work I was going to get for the day and urgent it would be, so much that it was not fun for me anymore. So in a way I am glad that I got laid off. I never had the gut to quit because I am a singly mom and I need insurance for me and my son. So here I am, going to help out my brother in real estate investing from now on.
We don't have loan on this property (bought it at almost 7mil, 6.75 cap, 100% occupied with 9 tenants. By now 3 tenants are out: a gym at end of 2019, a vitamin shop at end of Feb, a smoothy shop at end of March). And have enough to invest/buy some more when things are settled with this pandemic. I hope I will get a chance to work with you soon, and learn from you.
We did think about splitting the space up into 2 but the cost might be a little much now while rent is down a little bit. Still exploring options. That's when this young martial artist called and asked. He owns another school locally and wants to try out at this location. Looks like they mostly teach kids. He said he can only pay $3000/month and can pay first 2 months in advance, 1 year lease then after that we can get rid of him and rent to higher pay tenant, or we can re-evaluate and re-new. Our base rent is $2.50/sqt/month, NNN is $0.50/sqt/month. So this $3000/month is not even half what rent is supposed to be. However, given everything is slow down with covid-19, and we have a tenant just moved out at end of March (vitamin shop, yes, you did mention this in previous post, sigh) I am wondering if we should take this instead of running into risks of having it vacant for longer period. Looks like he is doing good at the other location but like you said his profit margin is really low and can't afford high rent.
Could you please explain how the personal guarantee work? I need to look into these lease and see if any of our tenants have that or not. I am still in vacation mode since I had been at that programming job for 20 years without any break (first and only job since college). But starting in May I will need to get more involve.
Thanks.
