All Forum Posts by: Travis Wilkes

@Luke Grogan The estoppels are critical in these situations as you are seeing from the one tenant that may have been promised a remodel. If this was truly part of her agreement and the current owner will not do the work, then you can choose to do it yourself and eat the cost, or you can reduce your offer. I would suggest meeting with each tenant personally and having a copy of the lease and an estoppel letter ready to sign. Let them know who you are and what is going on, you may even ask if they are happy and what is one thing they would like improved? These conversation may or may not be better off with the current owner present. But obviously you would need the owners approval. Best of Luck!

You are in a great position to sell right now. I would advise not doing the cabinets and countertops. The general maintenance you mentioned doing will be enough in this market. 

Now if you have the $10k to spend you can and will get that back plus a little more from the buyer. But now you have to deal with contractors, unknown issues that may come up, the time of waiting for them to schedule and do the work, and dealing with any poor quality issues on their work. In my opinion not worth it for a few thousand on the back end. Sell as is and get the money sooner rather than later. Best of luck.

I agree with @Steve R. and @Jordan Moorhead on the positive aspects of Leander's growth and the diversity and progressive developments upcoming. Their water troubles (lack of supply and infrastructure) is a concern and could cripple values. I don't see how the city can afford an $80 million dollar price tag on a water supply project. Their residents are already paying double the price of other similar cities in the area. I am still bullish on their growth but this is a risk that needs to be considered. 

What a great opportunity, congratulations. 

As @Matt Williams mentioned the goal would be to switch to NNN. I have seen smaller tenants be very resistance of NNN leases. They are much more comfortable with the idea of security that you will fix things as needed and they have a relatively consistent monthly expense.

I would definitely consider the partner. I wish I had one on my current deal for daily task assistance. The money would be very helpful as well. You are in a less hectic and demanding situation than a redevelopment like I am in, but I truly believe in having a great partner. That's the catch "Great partner". You need to have a partnership lawyer draw up the agreement and set clear expectations. Money is usually the easy part the daily work commitment and level of expected performance is the hard part.

I would send the loan request out to 5 different banks. They will all need about 95% of he same info so it doesn't take much do cater to each one. Then you have a very solid competitive loan rate, terms etc. 

Get an appraisal and survey during due diligence. and try to find a broker with light industrial experience to confirm area lease rates. You could simply pay him for this info or the carrot for him would be he can be the broker for the property once you own it.

Thanks for the response

Good morning BP - I have searched for a comprehensive answer to this without success. I have see some really informative answers and comments by Matthew Teifke back in 2017 and Joel Owens over the years. 

A few post mention a number or a range for different levels of condition for the current space. For example, $35 per sqft for raw space or $5 per Sqft for 2nd gen space, high demand market.

This is great info, I would like to dig even further.

What percentage of the total lease would a general rule of thumb be for landlords to give TI? For example, if I was leasing $5000 for a three year term and the lease rate was $1.00 Sf/Mo or $12 Sf/Yr that would be $60,000 annually for a total lease term of $180k. What percentage of the total lease would be common to pay as TI allowance without adjusting per SqFt rate? 

Is there a general formula any landlords on here use to calculate a range or a starting point for negotiations? I understand many other factors can come into play such as market demand, condition of space etc. But my thought is if the lease per SqFt already has the market and conditions built into it, then there would be a general/standard or acceptable percentage to entice a tenant.

Or am I just off and if the price per SqFt already has all this factored into it then you just up the lease based on the TI requested and amortize it over the term?

Thanks in advance!

My suggestion would be hire an architect to redesign the face of the building and modernize it. Also find any ways to improve interior space.  I would assess the businesses on the 1st floor, have they been good tenants and for how long. Can they be helped to survive the downturn and come back stronger. Do they have nearby competitors that are struggling as well as if their competitors close how much will that benefit them. 

If he is getting market rent then there isn't much he needs to do other than keep his tenants happy and ensure there is no deferred maintenance. 

I wouldn't convert to full residential but I also don't have all the facts. Best of luck to him!

Without knowing details of the deal, I would say if it is profitable your loan should be fairly simple to obtain. One concern would be the use, is it contract parking or just convenience. Is it business (office) based or entertainment. Hopefully they aren't selling due to something changing in the business model.

Yes you need to have liens checked (title should take care of this), you also need an appraisal done by a experience company as well as a inspection focused on structural and stand pipe system, if applicable. 

The Duns number is still used by some folks. I don't put a lot of stake in it but for some government contracts or deals it is required or beneficial. Put it this way, it wont hurt.

I don't have any experience in storage, but as far as managing from a distance, I have and am doing. I have found it very valuable to find someone (could be a small PM firm, maintenance co, or contractor) local that I can send by and check on certain things. No matter how much automation you get set up something is going to pop up that you didn't plan for.

This person just has to be a warm body that you can have go onsite and report information to you. For example I had a call from the City that they were going to fail an annual inspection due to an issue. I had my warm body go onsite within 10 mins, explain the real issue to me in detail and send pics and video. I then was able to tell them how to fix the issue which was a valve that had been mistakenly turned off. Thee inspector was called back out passed the inspection. I have many other examples where I have saved time and money by having this person with no real specialized knowledge help me solve and avoid major problems. 

best of luck on the deal

Start with his the business tax returns for the last 3-5 years. In addition to the items you mentioned you will need to know what he spends on operating cost, unit make ready cost, any recent remodel cost, maintenance cost, Property Management cost just, legal fees/evictions, typical rental loss. Just a few I can think of. Plug the numbers into a deal calculator. 

Cap rate depends on many factors, where is the property, is it going to appreciate quickly, will you have to sink a ton of funds to force appreciation, what do you want out of the property, and so on.

Sounds like there may be potential for value add, hope the deal makes sense Best of luck.