All Forum Posts by: Michelle P Stafford

Thanks for everyone's advice here!

Update: In a more favorable market I would have waited before committing to this deal which I agree has some yellow/red flags. However, being that it's been unoccupied and just bleeding cash for over a year now I decided to pursue it. The rent will more than cover my bank loan and with the NNN lease the tenants will be covering all the other expenses.

Fingers crossed it all works out. Lawyer approved!

Hello all,

I'd like some advice from the group of experienced investors. Here's my situation in short details:

Bought a commercial property for $699K in 2019 through a 1031 exchange which cash flowed beautifully until late 2022 when the tenant bankrupted and moved out. 

Property has been on the market to sell or lease every since (and clearly bleeding cash!)

Now: Interested tenant  who would like to purchase the building but unable to come up with a loan. Last month they stated they had secured an SBA loan but that fell through. Would like me to carry the loan which I would be open to but my bank is not ok with this (I owe approx. $300K as I put a hefty amount down through that 1031 exchange).

Current offer on the table proposed by my broker:

$600K Purchase price

7 year lease with option to purchase within 3 years for an amount equal to $600K less what they would have otherwise paid in principal under under a 7% loan for the same period). 

They pay monthly rent that’s equal to a 25 year loan of the entire $600K at 7%. ($4,241)

No money down. 

According to him the Market Rent = $19.43 NNN and after 3 years if they do not purchase I could sell it.

Thoughts? Ideas? Is this crazy or a good idea considering it's been on the market for a year with only a couple nibbles? All responses appreciated!
TIA

Thanks for your input! Is the exclusivity clause normal as well?

Hi there,

I'm just curious what the normal broker fee is for finding a tenant for a commercial space, specifically an office space. The broker that I worked with to find the commercial property charges "6% of the total gross aggregate rental for the first five-year lease term and 3% rental
for the term past five years". Is this a reasonable fee?

For reference the property should lease for about $5000/month = $60,000/year and $300,000 for that 5 year term. This means $18,000 to the broker upon execution of the 5 year lease. 

My bigger concern is:  If -------------, Inc., a cooperating broker working through Broker, the Owner, or anyone else exposes said property to a prospective Tenant during the listing period, and this prospect leases said property within six (6) months of the ending date of said listing, then Norris & Stevens, Inc. shall be due its stipulated fee"

Is this typical? I plan on working all my own contacts to also try and find a tenant and I sure don't want to do all the work and then still pay the Broker $18K! I have a lawyer who can draft the lease which would likely only cost me about $1000. I'm just not confident I can find someone on my own so I want to keep a good line of communication with the broker as well. 

Any thoughts and insight would be greatly appreciated!

Michelle