All Forum Posts by: Quang L.

Would you lease a part of your strip center to a head shop (tobacco shop that sells pipes, vapes,  and related items)? Their existed stores seemed nice and well decorated with the theme. But its presence could be allergic to other tenants and their customers.

With weeds became more legalized across the country these stores may not as taboo as they used to be. But I would like to hear from investor experiences. This question is pertaining to Dallas Metroplex area.

@Jon: I already worked with a commercial broker. Would like to get the feedback for the property and the loan from fellow investors.
@Joel:
It is $2M and we put down $500K. We planned for worst case scenario (after 4 years the big tenant left and we couldn't find a suitor before loan recalled at 5th year). Basically we need to put in a lot more to get a loan on 30% occupied property.
Prepayment condition is great. We only need to pay interest delta at the time of repayment with some factor. But I don't anticipate we refinance before this loan is due.
Do you think this ~4.5% of 5 year is a good interest rate? or we could do better for a similar deal?
Next question is great. But I don't think tenants need to report their sales to landowners. So how we could get that data?
I concerned only the big tenant and current they paid 15$/sqft/yr for an average sales of $107/sqft/yr for their national average.
So it is 14% which may be typical for this type (not dollar store but deep discount one)
We didn't see the lease yet but expect to see corporate guarantee in next 4 years for that space regardless of performance. For smaller shops, my estimates based on traffics of their customers they are doing ok.
Thank both of you for replying.

I think class A. metal roof, masonry, tiltwall, like a mall. It is next door to a JCPenny.
The neighborhood is a clutter of all popular retails: Walmart, Costco, JCPenny, Movie theater, popular eating places, etc... It is a typical setup in suburb. I guessed all of big boys wouldn't be wrong to pick this location.
The neighborhoold was built during the boom so it probably sufferred at some points during 2008-11 but now at full capacity with little vacancy within 1 miles. Building is 6 years old. Nothing to repair visibly.
Last question is always in my mind. The retailed company is doing ok, not great. But it is established so I don't have any worry in next 4 years as it has to pay.
Will it renew 4 years from now? with same or higher rate? will it be better with new tenant? I don't know as it is too far in the future.
Normally bank won't give loan longer than the lease but I insisted to get 5 year deal so I have a year to get new contract straighten out or get new tenants. What else we can do at this time?
Any kind of insurance we could buy in this case to ensure we won't lose anything other than the money already in property in the worst case scenario? PMI is not for commercial and this is too small for credit swap.

A retail building right on highway of a suburb of Metroplex. It is ~9% CAP with 100% occupancy. A corporate lease with 4 year left occupied 70% of the property and several smaller tenants occupied 30% with ~3 years left. Current lease rate is low to average for that area.
Line up loan directly from bank with 75% LTV @ ~4.5% 5 year term, 20 year amort. LLC is set up to hold it and bank is ok with it.
I am still concerned I may screw up somewhere on 1st commercial. Any tips on what to do in inspection phase?
TIA

I am looking to buy a commercial building in Texas with several tenants and anchored by a corporate one. Their lease has 2 years remaning and several 5-years options. In short, if they renew 2 years from now then this is a good deal. If not, it can be a bad one as they accounted for 70% of income and building was designed for them with a drive through.
How can we know if theyy will renew? We can camp outside and count customers but any market intelligence services can provide that data?
Thanks in advance.

Thanks! Dion and Bill.
I look for offer that is 5-6% for 10 years balloon. One local bank that I checked only offfer to primary owner occupied property. My case is purely passive investment. So I will check with more local banks. I thought property spoke for itself with almost fully occupied with long term leases and DSCR would be >1.5. The property is strip retail that has multiple tenants which I think would be lower risks than single-tenant property.
Both of you expect that I have to down more than >25% to get it done. Any insights why lenders wouldn't like to finance this kind of properties?

I did plenty of residential investments and loans with online lenders. But doing first true commercial loan for a retail building (1.5M loan with 75LTV) can be a different experience due to different qualification process.
Questions:
1. who are best lenders? local banks or online lender? if local banks then can please give some name in Texas?
2. would 75LTV enough for them to isolate my other assets from this investment? can we put building under a LLC instead of our names?
3. what is best term if I plan to keep property in long period? what needs to be there to make note extension easier in the future.
Thanks in advance
QL