All Forum Posts by: Matt Moreland

 1 month free per each year seems excessive in my experience, that's more than an 8% annual discount in rent which knocks out any annual increases accounting for property tax, insurance, and inflation increases IMHO.

Typically most concessions are seen upon signing of the initial lease, with any further concessions in renewals being negotiated or brought up well before time to re-sign. At initial signing, you will often see a Tenant Improvement (TI) allowance to aid them in getting setup and operational. Some others: delayed payment of first month's/last month's rent, payment plan for deposit so they can spend more $ standing up the location and getting it to a point its generating revenue, etc. 

For renewals, the "concessions" usually tend to be small requests made by the tenants that aren't necessary but would indeed help them be more comfortable in the space. I've had requests for tinted/reflective window film to help keep it cooler inside a location with big windows (this can be a win-win actually, since it cuts down on HVAC usage and can extend useful life and the amount of time shoppers want to spend in the store). Requests for more/different lighting, new flooring/professional carpet cleaning in stores with high-traffic carpeting, things like that. I've never had anyone come back and request upon renewal to get reduced rent, recurring discounts, or a brand new TI budget. However, I could see a longterm tenant (2+ renewals) requesting some assistance with TI if they have been in the space long enough that it has become dated and needs to be completely updated.

Hope this helps and answers your question, Courtney! Feel free to reach out if you have any more questions! Always happy to talk real estate.

Absolutely! Happy to help wherever possible. The retail space is a great one to be in. Wish you the best of luck!

-Matt

Josh, I would suggest connecting with an experienced commercial agent in your area who specializes in multifamily acquisitions. They will typically have recommendations for attorneys, already have LOIs structured that can be used to work out exact terms of the agreement, and alongside your attorney can ensure that the final purchase and sale agreement are aligned with the initially agreed upon terms and serve your best interests. 

As is mentioned above, there a lots of free LOI templates online. Most attorneys and experienced commercial real estate agents are sending out LOIs multiple times per week and can help you get through the next steps smoothly.

Best of luck, and keep us updated on how the deal plays out!
-Matt Moreland

If you're calculating the true cash-on-cash return, you use the entire mortgage payment.

For example, if you purchase a $100,000 property with $20,000 covering the down payment, closing costs, insurance, taxes, etc. and over the course of the first 12 months (unrealistic but bear with me for the sake of the example). You then pay $12,000 in mortgage payments over the course of the first year, you are in for a total of $32,000 ($20,000 closing and misc. costs + $12,000 principal & interest). 

If you are bringing in $1500/mo in rent, you are hitting $18,000 annually for your rental revenue.

In this case, you would take the net of the rent revenue (leaving it at $18,000 for sake of example) and divide it by the total amount of cash in the deal ($32,000). Thus, providing you with a resulting COC of 56.25%.

-Matt

@Jared Trindade! I have been the agent on just over 1mm sqft in industrial warehouse space over the last 5 years or so. Never done anything specifically related to converting industrial/warehouse space into self-storage but have certainly discussed it with clients who were playing with the idea or who have converted warehouse space into other higher margin-use spaces.

Would love to chat and hear more about what you're thinking and what your clients are looking to do. I have personally invested in a little over 20,000 square feet in industrial/warehouse space so my experience from the investor perspective is more limited than from the agent side, but more than happy to help any way possible.

Cheers!
Matt Moreland

For tenants, the benefits are many:

-Nimbleness/Flexibility: the tenant leasing the space in the shopping center is able to commit to a 3, 5, or 10 year lease term on a space for their business without being permanently tied to the physical location should they choose to relocate for any number of reasons (traffic count, building their own space, poor landlord/tenant relationships, deferred maintenance, etc.)

-Cost: for many tenants in shopping centers, they aren't the huge national anchor tenants that many people think of initially. Whether it be Hobby Lobby, Best Buy, big box liquor stores, etc. Often times the tenants of shopping centers are locally owned boutiques, barbershops, salons, small restaurants, etc. and the operators of these businesses don't have the liquidity to purchase a facility for themselves in addition to starting or running their business. Having the option to lease a space in a shopping center without having to buy the property allows them to be in business. 

-Maintenance: most business owners that become tenants of shopping centers want to focus on running their business, not maintaining the exterior lights, restriping the parking lot, and emptying common area trash receptacles. It is much more convenient for them to pay a landlord who handles the upkeep and day-to-day requirements of maintaining real estate so they can focus on their talents and skills that have the highest ROI--operating their business.

-Location: most of the time, shopping centers are located in strategic locations (hard corners, along thoroughfares, at major highway junctures, etc.). Locations that for the most part, individual businesses would not be able to afford to be located at. By signing a lease as a tenant alongside many other tenants, they can capitalize on premium location (which we all know is key for most businesses, particularly retail), and not pay an exorbitant amount compared to their gross revenue.

-Tenant Mix: contrary to popular belief, it really matters what the tenant mix is in a shopping center. A shopping center with a fantastic tenant mix will have a waiting list of possible tenants hoping to secure a vacant space when one frees up. Complementary businesses act as a rising tide that lifts all boats. If you've got a salon, midscale dining, boutique shopping, retail shopping, cafe/coffee shop, and take out restaurant in one shopping center, you will have customers of each business coming for one tenant and staying to visit others. The bigger the shopping center, the more strategic this can become and the deeper this topic can go. This can be a royal headache to manage, and something that most business owners that are tenants do not want to deal with balancing in addition to operating their already busy business. 

This is just my take from having leased up quite a bit of shopping center/retail space representing both tenants and landlords. Hope this is helpful and answers your question adequately!

Regards,
Matt Moreland

@Tania Leung, every Cody has said above is exactly right. If you want to renew with them, reach out 1-2 months before their renewal window approaches in case they have forgotten (you might be surprised how often this can happen in large national firms with so many small moving parts) so that they have ample time to discuss and get back to you. This also leads to having more time for y'all to negotiate as well if they have more/new asks for you as the landlord/landlord rep.

If you do not wish for them to renew, I would not reach out early to see if they're renewing. Depending on what the lease says, they may have a specified number of options to renew at fixed rate increases over X number of years (for example, they have 3 options to renew with each renewal consisting of 5 years with a set annual gross rent increase of 3.5% or something along those lines). Working with some Fed tenants, they had been in my landlord client's space for decades when I came on as the leasing agent. They were 3 years out from terming on their lease when they reached out to me requesting they go ahead and sign a renewal for another 5-year term when this lease ended, with 10 consecutive options for 5 years each after that (essentially locking down the space for 50 years if they chose to do so). Most tenants are not this proactive, but if you can get big tenants like that secured with strong terms and agreeable escalations corresponding to each option/renewal, they can be some of your most stable tenants.

In other cases, there may be no outlined/detailed renewal options stated in the lease, and in that case it is possible in certain circumstances to notify them at the appropriate time that the landlord does not seek a renewal and will be listing the property for lease at market rate if the lease contract states that is within the landlord's agreed upon rights. Again, this is never the ideal scenario and is not the route that you want to go down if possible, but it does happen. 

Best of luck, Tania, and I hope you are able to secure your national commercial tenant for years to come!

All the best,
Matt

 Great explanation of VRBO vs. AirBnB!!

The fact that it flooded so recently is more concerning to me than the FEMA flood zone designation. Regardless of designation, I would see what could be done to mitigate risk of future flooding. @Houston and @Florida peeps probably have some really great insights!

Seeing similar things on social media and dug in a little bit. Here's what I've found so far:

-AirBnB generally leans politically left (relevant in this case)
-AirBnB has banned a conservative Canadian political commentator, Lauren Southern from the platform
-Sometime today or yesterday, AirBnB sent a notice to the family members of Lauren Southern, notifying them that they are banned from the platform for being related to her

General attitude is that it is becoming somewhat Orwellian and consumers of all political leanings are uncomfortable with the actions that AirBnB has taken in this case. Hoping that they take corrective action and walk this one back. Bad look on AirBnB as a company and platform to punish family members of those whom they disagree with.