All Forum Posts by: Dave K.

I agree with @JohnWoodington but take it up  a notch to others paying upto 5% in a checking account.  Automate the spending requirement by making smaller payments to your bills and you got a guaranteed 5% interest rate.  May have to open multiple s they have $10K max limits..

Also check out the CD rates at 3.25 for NASAFCU.  Doctor of Credit gives you lots of info on where to put liquid money.. 

https://www.doctorofcredit.com/high-interest-savings-to-get/

@ozemNaremm I personally don't think there's anything wrong with a boring safe investment. The CD rate seems to be better than the nationally available rates listed at Bankrate.com so I say if you don't need the money in the next 15 months, and you don't want to play the stock market game, then by all means, do it. 

Just keep in mind to keep it in a FDIC or CU equivalent protected institution.

Interest rates are being raised little by little so CD rates will increase as well. Keeping it in a short term CD is a better idea than a 5 year CD. 

You might want to open multiple CDs so that if you need to break a CD, you can chose to take a smaller early termination fee rather than forgo the penalty for the entire CD.  $50K x 5 perhaps? 

Lastly, diversification.. why not consider putting some money into REITs or Dividend Aristocrat stocks or just plain old S&P500 fund to keep up with the gains in the market?

 Thank you so much for this info. 

In Cali, being sued by ADA lawsuit farm out of san diego.  They sue me, and my tenant.  The insurance doesn't cover ADA suits.. so sucks.. out of pocket loss.  They have about 10-20 plaintiff that they use and sue all up and down california. My complainant has at least 50 suites so far this year and hundreds in the past. They sued for handicap sign being faded, no van accessible parking sign and so forth. Small things.. They want 5 figures.. couple grand for fine and 10K+ legal fees. Mind you they just input business name and complainant's name and send out the lawsuit with typos, and wrong pronouns.  the yelp review shows that the law office is behind bullet proof glass... for good reason.  

ADA lawsuit, these guys sue everyone and everything..  they even sued dmv offices (lost), city offices (neighboring city and won) and sue all types of business from mom and pop to starbucks, gas stations and the corporation.  It's like they throw darts (suits) and see what sticks and how much they can get out.. 

I'm going to have to do some prevention. I'll put the building in an LLC, and the home in a family irrevocable trust with me and spouse in control? Also need to find some umbrella insurance.

As for Tort reform, the granny at McD deserved her money.  McD knew and didn't fix the too hot coffee issue and I've seen the injuries on a documentary and nobody would wish that on their worst enemy... unless they are the ADA lawsuit throwing types... then I'll throw that and the lettuce from chipotle and chicken with samonella on you.  

Hello fellow BP forum,

I recently had to make improvements to my commercial rental property due to ADA requirements on the property.  We  had handicap signs and access lines painted to "removed barriers for access".  Spent a couple of thousand dollars for the repairs.  I told the tenant I will pay for the cost of the repairs and reimburse him.

Now for the tax question: 

Under IRS form 8826 and CA FTB form 3548 there is a tax credit available for these cost but available to small business.  Do I as a landlord qualify as a small biz for the tax credit for both irs and cali? I claim the income under schedule E. 

I'm thinking maybe I can claim this because I meet under $1M amount and all I need to do is claim using the form to be eligible. 

Irs and FTB definition:

Eligible Small Business For purposes of the credit, an eligible small business is any business or person that: 

• Had gross receipts (including that of any predecessor) for the preceding tax year that did not exceed $1 million or had no more than 30 full-time employees during the preceding tax year, and 

• Elects (by filing Form 8826) to claim the disabled access credit for the tax year. 

For purposes of the definition: • Gross receipts are reduced by returns and allowances made during the tax year, • An employee is considered full time if employed at least 30 hours per week for 20 or more calendar weeks in the tax year, and • All members of the same controlled group and all persons under common control generally are considered to be one person—see section 44(d)(2).

I'm not an agent but here's my take on car buying.  

Tax write off on a lease maybe helpful but I tend to look at the cars as depreciating assets and think of how to get the best bang for the buck.  Also consider insurance and cost to own..

If you do end up needing to buy a car, consider this. 

New cars are nice but they depreciate at 10-30 percent the first year and sometimes by year 3-5, they have depreciated from 35-70% of their original cost.  Consider if a 5 yr old car can lose half it's value then their life expectancy by price feel like 10 years.. but that's not the case. 

There's a sweet spot where you can buy a car and drive it for 2-4 years and have very little depreciation even while you rack up some miles on the car.  That's when you should sell the car and get yet another low mileage used car that's taken a big depreciation.  If you are not in the market where you have to drive clients around a lot, then just get a used car and keep longer until it becomes unreliable or unsafe.

Go find a copy of Consumer Reports Used car issue and look at the reliability of the make and years.  Also look for ones that depreciate slowly from years 3-5.  Yes Lexus, toyota, honda subaru are reliable but so are hyundai and kia these days and they come with a long drive train warranty.   For example a Santa Fe 5 or 7 passenger may depreciate fast but if you buy a 3 yr used from a hyundai dealer, they will most likely give you a 10 yr 100K warranty on the drive train.  So you got the added assurance of protection for 7 yrs or until 100,000 miles. 

See the example below.. 

https://usedfirst.com/cars/hyundai/santa-fe/

"On average, you should expect to pay only 75% of the original cost with 92% of the vehicle's lifetime remaining for a 2017 model. That gives it a Net Used Value® score of 16.64 which factors in expected annual maintenance, price decline & reliable years left.

These sought after 2017 Hyundai Santa Fe models may be hard to find. Also consider a 2016 or 2015 as those were the next best values."

The best way for you to ensure that they leave your property is for them to be able to find another suitable location for them to relocate their business (preferably nearby).  Remember that their business is most likely their only income and (after 30 years.. they'll think of it as their home too).. you are ending their income at your location, they will be forced to find another location that they can move their business to.  The cost to move a business as well as to file for Alcoholic Beverage Control's license and permitting process will take time and cost them money.  

Regardless of how nasty they are, put yourself into their situation and try to think what might spur them to cooperate in the move. Instead of just giving them the 60 day notice, try to give them notice as soon as your lawyer gives you the okay to move forward.  That will allow them the time needed to seek another location so that they do move when the lease ends and when the end does come, they have had plenty of time to look for a replacement location.  With no lock on a lease, they will not be able to find a buyer for their business, at most they may find a buyer for the hard to get liquor license.  Remember, in their eyes, you are likely "threatening their livelihood" and they may try hard to fight or stall the end of lease "eviction". If they have done business there for 30 years, it would most likely make it easier for them to find a location nearby to keep the customers. 

I know in LA, there are limits to how close one liquor store can be to schools, parks, etc and considers number of other Liquor licenses before granting a new location with a license.  If the bay area is the same, then they will need lots of time and a help of a RE agent or broker to help them find a location.  

If you are motivated to get them motivated, I would scout out some spaces that they could move to within a few miles to see if a move to another location with similar rent is even a possibility.  The worst case being, if they argue in a long fight in court, you could counter with these options that you know are viable and they had the option to move to but chose not to.   If you don't see a suitable location nearby that they can move to.. then get ready for protracted ugly fight.

And if they do find a new location and move, you can bet that they will take all of the fixtures inside.  

Hope this helped.. 

Daniel,

Thank you for your reply. I sent you a PM via the Colleague request for a broker recommendation. 

Also for 4) Assignment - does that apply in situation when I want to start a new lease with the incoming renter and not when the incoming renter is just taking over the lease contract of the outgoing renter?

6) What is considered part of the transactional costs? Broker fee and maybe lawyer fees?

Thanks again,

Questions Re Commercial Lease on STL-Gross So Cal and on AIREA Forms

Hello,

I'd like to ask about a Single Tenant Lease – Gross and some questions related to change in tenants.

I currently own a free standing building in LA county with a tenant running a convenience store/ liquore store. The current tenant is under contract but they have decided to sell and have now found a buyer so we are in negotiation. When the current tenant began this lease I had the help of a broker draft the sales paperwork and the lease. This time I do not have a broker so the buyer sent over the lease with the terms. I have a few questions about the process of switching over from one tenant to the next.

Questions:

1. 1. Lease Doc - The buyer sent over the lease drafted by AIR COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERICAL SINGLE-TENANT LEASE – GROSS (2001). My previous lease was the same form but an older version. Is this the standard form many small biz owners use for lease contracts? I've tried researching online but could not find much info on the leases good or bad. Law firms tout their services with pros and cons if I seek their service but before seeking legal advice I'd like to hear the RE advice from the pros here first.

   Anyone out there with experience dealing with leases to the mom and pop type stores? Does this lease favor either side?

2. 2. Guarantor – The current lessee is in the name of the owner of the business but the new lessee wants to have the lease in the name of the corporation. New buyer owned a prior business under the same corporation and has sent the lease in the name of the corporation. He has also sent over a form from AIREA Guaranty of Lease with the buyers name as the Guarantors. Does a Guaranty of Lease basically mean that if the corporation can't make payment he'll be responsible for the payment?
3. 3. Lease Terms – The terms of the lease are for 10 yrs with a 5 yr option. The option has an adjustment with COLA (CPI W) factored in. My previous option had a fixed amount. I am wondering when the option is exercised, and let's say the contract starts in October do I take the CPI W that's released by Social Security in the beginning of the year and in October of the option years adjust it up with that rate? Also, I am assuming that CPI W is a rate put out by Social Security and is not locally set. Is that correct?
4. 4. Prior Lessee and New Lessee – Is there some type of form or letter that I should draft to the outgoing lessee saying that once the incoming lessee has signed the lease, the outgoing lessee's lease will terminate? I am not very familiar with this lease terms that discuss the change in ownership of the business and new lessee coming in.
5. 5. Insurance – In a STL Gross lease does the lessee ever buy insurance for the building? In the form is says that the Insuring Party Lessor is the one paying. Is this negotiable with the new tenant?
6. 6.  Recommendations -
   1. Lawyer - Anyone have any recommendation to a good RE lawyers in So Cal? A plus if they routinely deal with this AIR form and small mom and pop leases.
   2. Insurance – I'm shopping for an insurance provider who can sell me insurance on building, liability, as well as an umbrella policy. A plus if they also have home/car business as well.

I realize this is long and I am asking a lot of questions so if you can help with even one I would appreciate your input and advice.

Thanks

Dave K

Tiger M. Yes it looks like the ones I was looking at 3 days ago have now turned contingent. Wow that was quick. One of the properties that I thought was interesting was this one. ML #: 1343677
3 days on market $194K 4Br 2000sq ft could maybe rent for $1200-1400. Have no idea if it was in good condition or not. There's another similar house on the street with palm trees and backing to the main neighborhood street for $25K more. I thought this one was better with a bigger back yard w/GRASS! Seems to have much lower hoa and with a good community pool exercise area.

So to me it looks like if you want a deal, you must watch the MLS every day and check to see if there are any good deals around. The ones in Summerlin are gone too. This one ML# 1343633 is above the price range at $320K but with 5 bed 2500sq ft. and a big lot, it's not a bad looking house. Most of the homes in the Vistas have smaller backyards except for those nice big houses in the upper section. Hard to imagine that the Vistas were below $100/sq ft and now it's just keeps climbing.

I have to stop looking at the good deals that are showing contingent from last year. Wow some of these other properties sold at good deals. I wonder if some of the banks are trying to find a way to get the short buyer to get disqualified so they can relist it at these higher prices.