All Forum Posts by: Zachary Toothman

Hey All,

I have been building out my portfolio of properties, each held in an individual LLC. I am now considering creation of a property management company to simplify some finances. Are there rules against assigning all profit of the ownership LLCs to the property management LLC or S-Corp? Effectively the entities owning all the properties would show $0 net and the property management company would be the net of the sum of all?

Thanks!

Thanks Everyone for the guidance and items to consider. I was able to negotiate and increased rate on the whole building in exchange for dropping to 5 year term. Works out to about 28% higher rate / sqft and added triple Net. Parking expansion will be handled as a pass through cost liable to the tenant without any guarantees. Ultimately I think this worked out really well. I appreciate everyone's responses! @Joshua Spurlock @Kathy Henley @Ryan Seib @Ronald Rohde

@Joshua Spurlock - Thanks for the post. They have said they need the parking to meet their projected target for transactions per day, etc. There currently are no other tenants, the previous owner was not working the property very hard, so I can lease them the entire building. They want the shorter term in the event the location doesn't allow their business to net as much sales as they hope. I'm trying to decide what value a buydown should be for the term, looking at keeping the NPV10 constant if possible. If this tenant leases the entire building and then leaves the property would be in a very negative cashflow situation. 

@Kathy Henley Thank you for your reply! So the lease was assigned to the new company and myself and at the moment I have no reason to believe they don’t intend to honor. Legally I don’t think they have a leg to stand on. Ok top of that, they are a medical cannabis company in a state newly legalizing the industry with a highly coveted permit tied to this address. It would likely be challenging and risky for them to try and move the location prior to even opening up their dispensary. Their main driver is having enough parking, per their business opinion. They want to lease the entire building to control the parking, but as you said that increases my risk by losing diversification of income. I think the property long term has potential to rent but commercial space is certainly a little more unknown in the COVID era. The draw for this property was this 10 year lease. New company wants to drop to 5 years and add the expansion. I feel like there should be a premium on rent and a penalty for reducing term, obviously they disagree. I guess it’s my opinion that I don’t have to budge but in the interest of forging a long term relationship with potential lease extensions I would like to be fair. I just am not sure what “fair” is as far as a penalty fee or increased rent. I have been clear with them that I’m willing to assist with the parking but can’t guarantee results, but they seem insistent in trying to hold lease extension or increased rent over my head to perform. I’m not willing to dedicate much time or effort to that endeavor, but if a few phone calls or on site meets will get it over the goal line for them then that’s a different story.

Hello! I just closed on my first commercial property a few weeks ago. There are a couple commercial units and some residential units in the building, and one commercial space was leased for 10 years earlier this year. That company was acquired by a competitor at the same time I was buying the building and soon after close they want to renegotiate the lease to a lower term, but want to lease the entire building. I see that as a major risk by eliminating the diversification of my tenants while sacrificing the security of a longer lease. They expect me to help them procure parking at an adjacent property to sign-on for a longer term, which I can't control.  I feel like they should pay a penalty or an increased rent to offset that lost value of longer lease and "buy" my risk of a single tenant. Any advice for a fair resolution to the problem?

Hey All, I'm new to Bigger Pockets and starting to analyze my first deals. I came across a home that's on the foreclosure market for $89K. Somebody had started to renovate the project but it has a long way to go. I've been in and have made notes on all the things that need completed but it's difficult to know how much work will be required on some of the partially finished projects. I'm coming up with close to $100K in renovation cost but I'm not sure if that's too conservative. Any advice for honing these repair estimates?