@Jack Butler
Thank YOU soooo much for such a great set of tips. Really really appreciate it.
And yes, TIN is tax identification number of the partner, TI is tenant incentive I was talking about.
They already own a Cuban restaurant and from research they are doing pretty well with that one. Other restaurants on this street that this strip center is on are doing very well. It is a very busy section of the town.
The size of the space is about 1200 square feet and it is in a strip center (9 units total, built in 2018 and we purchased it in mid 2019). It is NNN. The previous tenant (a Nutri shop) was not doing well and had to terminate the lease and just moved out on 1/15 so this space will need to be converted if we decide to lease it to these new people. In this strip center we already have 2 restaurant tenants, 1 is a Thai curry and 1 is a Jinya ramen and both have been doing very well. This new potential tenant wants to build a Mexican restaurant so that might be a good mix to have to the strip. Since we are new we have no idea how much of the converting of the space into restaurant will cost and how much in TI landlord normally gives to tenant so that's why the question (along with the TIN question).
As your suggestions on TI/TA:
1) Will go with this.
2) Or this.
3) Will avoid this because we already got burned by this. We have a second unit that has been vacant for quite a few months now. It was rented to Fit Body Boot Camp and the guy was not able to pay since day 1 that we took over. This strip was built in 2018 and we bought in mid 2019 and soon after we bought we found out that previous owners were giving this tenant 20-30K in TI and all kinds of promises to get him to sign (of course they then raised the base rent higher) so they made the strip 100% occupied and raised NOI. I am sure you are way experience in this so you would know but back then we didn't. Big lesson learned.
4) Great tip. We will need to think about this. We will need to think about how to structure it.
We will need have more talk with them about the followings:
1) Who will own equipment?
2) Need clarification from them if the 2 persons on lease will be on lease as 2 individuals or as in a business entity such as LLC.
3) The questions you posted above:
Do they have a cost for construction and itemized list of equipment? If
so how much? Has the health department approved of the plan and
equipment? Can they afford the initial build-out to transform your space
to a restaurant that will pass health inspections and have enough funds
left for the start up, food cost, and marketing?
Jack: I have more questions for you.
1) So is giving 40-50% in TI/TA is the norm in this case?
2) Who normally own the equipment? Do we want to say we will own it, or better let them own it?
3) How will you go background check on a person who only has TIN?
4) What kind of screenings/checks you will do in this case beside credit/background/eviction check? Do you ask for their previous tax returns and bank statements?
(the man already passed the credit/background/eviction check. Still don't know how to check on the partner with TIN yet).
Once again, thank you so much for taking the time to answer and write such a great long, detail set of tips/comments. Your help is greatly appreciated.
