All Forum Posts by: Howard Abell

Sonia, the expense issue versus capital expense issue is an ongoing one. You should question a CPA (I am not a CPA) and get an opinion on how to classify the different elements. For example: putting on a new roof that lasts 15 years is a capital expense. However fixing a leak in the roof is an operating expense. By the way you did not mention taxes which is an operating expense paid yearly. 

Cap rate is based on NOI (net operating income but does not include the mortgage (debt service) or capital expenses. When you subtract the mortgage and cap ex you get Cash Flow.

In most states, the listing broker has a responsibility to show all offers, LOI and most communications from a potential buyer to the client (seller). If a sufficient amount of time has passed and you have no explanation from the seller's broker for the silence you can suggest to that broker that there is a break down in communication and that you do not desire to circumvent his positions but you will go directly to the seller for a direct answer.

If that does not get a response go to the seller.

In this day and age, "out of town" does not cut it. Have your broker press the other broker for a response. Try to get it in writing to be sure your offer was actually delivered. If you still get no response go directly to the seller. Without more detail it's hard to talk about the different options available to structure a deal. However if the the building is suitable and you have the capital, a simple, straight forward deal would leave you time and energy to concentrate on your business and not the real estate.

The numbers may not be your only consideration. You gain by reduced maintenance and service calls, reduced water damage potential, a satisfied customer who will feel respected and a selling point when marketing the space. If you are renting at or near the top side of the market you gain by giving value to your tenant (customer).

You need to lock down what the net operating income (NOI) is by subtracting the taxes and CAM from the total rental income. With that in hand you can determine the Cap rate of the price at 700-750K. You need to do some research or ask a broker to give you an idea of the comparable cap rates for gas stations or similar mixed use type of properties in the area. You should be talking to your CPA to determine if this would be an advantageous move for you and your business. It probably would be. Figure out what the amortization would be for the note you will be paying and compare that with your rental now. You might be paying less in monthly output but again you should be talking to a CPA. What would be the interest rate on the 20 year note? Will the owner seller finance? If not you might be eligible for an SBA loan as an owner/user of the property. Good luck.

You might check out office supplies stores for a pre-written lease and us that as a template. Also try the internet for Illinois specific forms.

Dave,

Think of it this way. When you buy that home in a park you are becoming a pad tenant of the park. You are renting the ground you are on. So the landlord would like to know you just as if you were renting the home and did not own it.

It's unfortunate that many landlords don't feel the need to treat their renters ,either pad only or home renters, like customers that they would like to keep as customers.

It's nice to know that he may be under market rent but work with the $365. Using Curt's figures which I agree with gives you an 11 cap at 1.3 million. Not bad for a pad only park. However, What does the water bill look like. When water is not individually metered, it tends to be over used. The water could change a 30% estimate.

Make sure title is in good order. No outstanding permits or violations with city or county depts