All Forum Posts by: Kavi S.

I own and live in a building where the first floor is an active business. 

I already own the equipment to clear the parking lot. But this is my first winter with another tenant in place, and I thought it would be appropriate to hire a service to keep things professional. 

It looks like that cost is going to be $500-$1000 per storm, and our CAM agreement is splitting that 50%. As I only use 10% of the 20-space parking lot, I'm kind of getting annoyed at the premise of paying $250-$500 out of pocket per storm, I'd rather get out there and do the work and pocket $250-$500 per storm. 

So how bad of an idea is that for my liability insurance? Should I open a handyman business and take out insurance?

How should I actually bill this? I'm not required to be following any GAAP protocols or anything when accounting for CAM, I just have a spreadsheet of costs that I'm dividing up and providing to the tenants. I could just use the numbers from the quotes, put that down on the ledger and do the work myself. Of course they're going to see I'm the one doing the clearing, and they're going to balk at the thought of paying for it, and there won't be a receipt. So maybe my own handyman company sending myself a bill legitimizes things? I don't know where their heads will be at. In general I've never billed for my own time in the CAM ledger, but I need to learn a good way to do that regardless of snow clearing, considering I do a lot of the landscaping myself too. 

They are paying tax, insurance, CAM for the 2 free months.

I don't know how it is in your state, but in MA for residential leases you can't co-mingle funds and have to pay interest on deposits and up-fronts. My attorney specifically put wording in to say I'll be co-mingling funds and not paying interest, which I guess is standard, but it did warm my heart just a little bit. Allows me to use that to fund their TI and just eat a little of the cost at the end. 

My next thing to figure out is how I want to configure billing in my online payments software (Cozy.co) - if I want to wrap all 3 into one payment, or have rent and additional rent as separate items. 

Their first payment was first month's rent (third month of occupancy, so they begin regular rent payments on the fourth month) last month's rent, a $3,000 deposit (arbitrary number ~1.5 months), first month's CAM, first month's taxes. The total of the payment is 85% of the TI I'm paying right back out to their contractors, so once again I didn't feel too bad about it. 

I also paid a $2,000 commission to their agent, my agent didn't take commission due to some history, and I'm turning a blind eye to how seemingly odd that part of the transaction was. 

The deal fell apart at the start of COVID when the Mass gov shut down non-essentials, but it came alive just last week where we agreed to continue with the lease we had drawn up 2 months ago.

They tried to pull a fast one and request an additional $16k worth of value "because of covid," but snapped back to the original contract when I said I'm not interested at all. 

In the end, I agreed to $10k in improvements, 2 months free rent, replace half the windows, install submeters, re-line the parking lot, and some initial landscaping on my dime rather than on CAM.

Total package ended up being worth about 10 months of rent out of a 5-year lease, (Napkin math: $20k) and the improvements do have some value to me, as well as being tax-deductible at 100% as QIP. After 8 months of vacancy and slow interest, I decided it was worthwhile to agree to it. They're also paying their share of taxes and other expenses as additional rent / CAM, so if I was to think about this as residential lease math, it's more like 6 months free rent. I'm pretty neutral about it, borderline happy.  

So far the tenants are just getting their build-out going and they seem like they're going to do well. 

I bought a 2 unit commercial building and have had it listed for about 6 months. The vacant half is configured as a large high-end hair salon, the other half is occupied by me.

I'm really excited to have my first interested party. But I'm feeling a bit nervous about the terms they're asking for, and I wanted to see what kind of input you all might have.

- I initially offered 3 months free rent to help get a business off the ground.
- They came back at me with 6 months free, no rent increase until 2022, AND I need to replace the windows, submeter water, replace some decking, do landscaping.
- I am just about to come back at them with no free rent, but I'll pay for their build out up to the value of 5 months of rent, plus windows/meters/ramp.

Now I'm realizing that that whole package is a ton of money, and I won't make any money for over a year. My agent is treating it as normal, is it normal?

I can understand that yeah the windows are needed because it's a fancy salon with an image to uphold, but at the same time if I just waited 1 year, I might find a tenant who would handle their own build out, and I might break even.

I'm also nervous about:

1. This isn't even an established company, there's some risk on the tenants themselves.
2. It's a bit wishy-washy who's responsible for their HVAC equipment, they want maintenance to be included in CAM which means I pay half of it. I want them to be responsible for filters/cleaning. I want to be between 20% and 90% responsible for replacement units if needed, but I'm not sure how to say that and what value is appropriate. On the other hand I'm ok with us firming up that all HVAC work is part of CAM, so I pay 50% of it always.
3. They're requesting I take on some initial landscaping outside of CA

Some additional background: It's a stand-alone building in the suburbs of Boston about a quarter mile from the highway and a large shopping center. I've had one tour every 45 days since listing. A sewing school and comic book shop decided it wasn't for them, most of the interest has come from hairdressers who are trying to start their own salon but mine is sized for a larger operation. I've been trying to catch a dentist or someone who wants to convert to office space, but I'm fine with a salon. I don't realistically know if I'm better off with the first offer or waiting it out.

What do you all think? Normal or too good of a deal?

EDIT: I posted this in the wrong place. I haven't figured out how to ask a moderator to remove this post, but I reposted it to the commercial forum: https://www.biggerpockets.com/forums/32/topics/795430-first-commercial-lease-negotiation

I bought a 2 unit commercial building and have had it listed for about 6 months. The vacant half is configured as a large high-end hair salon, the other half is occupied by me.

I'm really excited to have my first interested party. But I'm feeling a bit nervous about the terms they're asking for, and I wanted to see what kind of input you all might have.

- I initially offered 3 months free rent to help get a business off the ground.
- They came back at me with 6 months free, no rent increase until 2022, AND I need to replace the windows, submeter water, replace some decking, do landscaping.
- I am just about to come back at them with no free rent, but I'll pay for their build out up to the value of 5 months of rent, plus windows/meters/ramp.

Now I'm realizing that that whole package is a ton of money, and I won't make any money for over a year. My agent is treating it as normal, is it normal?

I can understand that yeah the windows are needed because it's a fancy salon with an image to uphold, but at the same time if I just waited 1 year, I might find a tenant who would handle their own build out, and I might break even.

I'm also nervous about:

1. This isn't even an established company, there's some risk on the tenants themselves.
2. It's a bit wishy-washy who's responsible for their HVAC equipment, they want maintenance to be included in CAM which means I pay half of it. I want them to be responsible for filters/cleaning. I want to be between 20% and 90% responsible for replacement units if needed, but I'm not sure how to say that and what value is appropriate. On the other hand I'm ok with us firming up that all HVAC work is part of CAM, so I pay 50% of it always.
3. They're requesting I take on some initial landscaping outside of CA

Some additional background: It's a stand-alone building in the suburbs of Boston about a quarter mile from the highway and a large shopping center. I've had one tour every 45 days since listing. A sewing school and comic book shop decided it wasn't for them, most of the interest has come from hairdressers who are trying to start their own salon but mine is sized for a larger operation. I've been trying to catch a dentist or someone who wants to convert to office space, but I'm fine with a salon. I don't realistically know if I'm better off with the first offer or waiting it out. 

What do you all think? Normal or too good of a deal?

Since my last post I've refunded one security deposit and signed on two new tenants. I wish I took notes when having zdeposit refund the deposit, I think I recall an option to provide documentation on withholding funds, but I did not need to. Next time I'll take some notes.

One annoyance I had was when a tenant paid out first, last, and security deposit via cozy.co. I was guided to sign up for a leader bank account in order to transfer money into zdeposit on behalf of my tenant. That was not necessary, zdeposit confirmed that the source of the money is not accessible to the tenant and I can just write myself a check in the amount of the deposit, then upload it as if the tenant wrote it.

Either way zdeposit remains a stress free service for Massachusetts landlording in my book. I'm still on it.

I'm looking at a new construction duplex right on the 495 belt (+/- 1 mile) and I think I'm going to throw an offer down. I'm looking at it for an exercise in house hacking, having graduated from my 3-family in Boston. 

I spoke with the seller's agent directly who informed me they just rejected an offer 7% below listing and they're not too concerned to keep rejecting until the building is move in ready. I was thinking of coming in around that region, not sure if I'm swayed, I was talking to the seller's agent after all - her best interest is probably a listing price offer. (Negative tone not intended - she's been very helpful!) 

My 3 family in Boston easily hits the 2% 0.7% rule. I'm not an expert, but I think that's decent inside of Boston. This building would be 0.64% at the current price and market rents. I could probably hit 1% in the same area, but in a 100 year old building with dozens of hidden problems. I'm thinking that lower ROI might be worth the lower frustration; this isn't my day job. I somewhat vetted the builders and they do good work, the building is well designed by a real architect, and I actually have a bit of a thing with the area it's in. (ok fine I'll admit I like it a lot)

Building 2 miles away is built in 1850, has additions in every direction configured like a circus fun house, 1 unit of land, $156/sqft, 0.55%er

Building 4 miles away is built in 1900, half renovated, 0.5 units of land, $199/sqft, 0.60%er

Building 0 miles away is built in 2019, no funny stuff, 2.5 units of land, $204/sqft, 0.64%er

So I'm starting to think it's worth the price. The seller's agent is certain it'll appraise appropriately and the loan won't be an issue. Do I need some sense kicked into me? Am I about to pay a premium?

Just got my tenant's new leases in order. So far so good.

After I uploaded the photos of the checks from the tenants, the tenants get an email have them e-sign an application for an account, then they deposit the funds from the check into that account, once the deposit clears you get a "secure email" (actually the more frustrating part of the system) that has a PDF attached which they ask you forward to your tenant.

The language is:

"As required by law, the following interest bearing savings account has been opened in your name to hold the security deposit and/or last month’s rent paid under your current lease at: [redacted] You will receive an interest check at the end of each year of tenancy, which will be automatically mailed to the property address listed above. "

...Some information about the tenant, myself, and the bank...

"Please be advised that if the total interest received each year exceeds $10.00, a 1099-INT form will be sent to the mailing address on file for tax reporting purposes. If you have any questions about the status of your security deposit and/or last month’s rent, please contact your landlord directly. For questions specific to the bank account holding your last month’s rent and/or security deposit, you may contact ZDeposit via email at [redacted] or by telephone at [redacted]."

Not a big deal to forward a PDF to a tenant but I'm not sure why it's not part of their system and it was annoying to have to sign up for their secure mail portal (but an understandable limitation since the PDF does contain non-sensitive PII) 

I use cozy.co for collecting rent so I just uploaded the PDF to the documents section of the lease which emails the tenant and keeps the docs in one place. 

I guess that's a wrap until I release the funds next year. 

I just signed up and tried to test it out on myself. As far as starting an account goes, it sends an email to the tenant for them to fill out an online W9 form and allows you to deposit their check by photo in the web site. 

I'm a software engineer by day, we're generally super nervous handing any sort of PII.. I'm liking that I don't have to handle social security numbers. 

Unfortunately I don't have my security deposit checks just yet so I couldn't do any further testing outside of the initial sign up flow. I'll give it a shot when the tenants start out, thanks @Anton Orlik for building a bit of confidence that it's not vaporware.