All Forum Posts by: Howard Abell

I believe you should engage a local commercial real estate broker. For full disclosure I am a licensed broker specializing in commercial property. The broker will be able to shepherd you through the contract, due diligence and closing phases of the process. Payment can be in various ways and is negotiable. You might ask if he/she would work for a consulting fee as you have already found the property and the seller might not be inclined to pay a broker. If the broker would rather work on a fee based on the value of the property and chance that the deal will not go through than 1-3 percent of sale price would be typical.

Good luck.

You have  a great opportunity to learn by doing and being mentored by your parents. If you can fit it in, go to college as well. Take a lighter course load or go to evening classes. It will give you a better background when you are on your own.

Good Luck.

I believe you are correct. In residential real estate many landlords look upon their tenants as adversaries and not customers.  The long term money is in treating your tenants like customers and you will build a solid business that has less headaches. Trying to bleed a property dry only leaves the value added potential for the next owner.

If it is pad only it would be fine. If you have Park owned homes you will need to devote time to issues that arise. Just something to think about.

One additional point on the right of first refusal and pricing the building. One of the more popular methods of pricing is the Capitalization method. This is explained here in BP. The important issue is that the lower rental affects your ability to price the building at the current market. You will have to find a buyer that recognizes that the rent is under market and that he/she is willing to wait until they can raise the rent.

Rent escalation is a negotiable element in a commercial lease. It varies with lease type, industry and asset class. For example an office building could be different than a NNN fast food lease. However, it is not uncommon currently to see yearly bumps in rent of 1% to 3% or five year bumps of 5% to 8%, etc. Also Option periods afford the landlord another opportunity to increase rents to further compensate for the below market rents received for the tenant doing the tenant improvement (TI). I hope this helps some.

I believe the TI in this instance was meant to be Tenant Improvement or as they say here in North Carolina "Upfit". As you say, most landlords will amortize the TI over the term of the lease. However, using it as a promotion or negotiating element is useful.  Either way you need to do the numbers and stay competitive at the same time. Sorry I have not easy answer but there usually isn't one.

Why would you pay off a loan that is at 4.75% interest. I would use the 300K or what ever is left after taxes and start your real estate career. Start small and use this forum and read about investing. You will find that you will do better cash on cash than the 4.75%. You can also start now and talk to the banks about refinancing to pay off the balloon. It sounds like you would have about a 65% loan to value and that should work for you with DG stores. Either way you have good options and a great beginning for your age.

First, congratulations on taking the first step. I am sure it will be a good one. Second, calm yourself as these are just small problems that you will have to solve. They are not overwhelming and with the help from this forum and others and your attorney it will all work out. If you do not want to deal with the trash, hire some teenager or day laborer for 10 bucks an hour and get it done. Your instincts are correct. Solve problems and keep turnover time to a minimum. Also learn more about the eviction process in your state. It's not rocket science and it good to know the process.

Good luck.

What you need to do is figure out what your expenses might look like with this home. Does good condition mean it won't need a lot of maintenance, etc. Since there is no lot rent (lol) the entire cash flow goes to the bottom line. If you take can a net of 450/mo you are looking at a  30% cash on cash return. That supposes that the land taxes could be included in the approximately 30% expenses of 200/mo. Could be  nice deal.