Commercial Real Estate Investment/lease option to buy commercial property
Hi, i'm getting ready to sell my current Thai rest. business (which I lease) ,and am looking into a property one mile down the road that used to be a pizza shop on a corner on a busy intersection. The only reason I'm selling my business and would like to relocate is because I'd like to put in an offer to lease with option to purchase the property since I do not have that option on my current lease.
I wanted to know if it would be reasonable for me to do such. The new property needs total remodeling, $100,000 in work. The current asking price is $649,000. My realtor is sending in a proposal to purchase at $475,000. I would lease for $2500+$520 in taxes for 5 years with the option to get a loan out and pay the $475,000 off at any time within the 5 years. If you do the math I guess it would be close to the asking price I'll be paying for should I lease and wait the full 5 years to get a loan.
I wanted to get an outsiders professional advice who understands. Should a portion of the monthly lease be subtracted from the Agreed upon price? if so, what percentage? Who would be responsible for the roof, ac and heating unit, sewer blockage, since I will be leasing. Would the owner be able to sell the property to anyone else during my tenancy?
My bio does not lend itself as an expert in this area...rather it does lend itself to help you decide if you should buy a piece of real estate based on the equipment and damages that has occurred or possibly occur in the future due to lightning and power quality. Many people buy property as an investment, but some times that investment becomes a money pit. I take the guess work out of that
My specialty is in HVAC, Fire alarm systems, CCTV systems, Gate access systems, power quality engineering, Lightning protection, and green power.
On the other hand, I have had training in your area you are asking. If I was a real estate investor, I would buy the property and lease it to you with a guaranty of a 250K profit margin in five years and a good income.
Rent to by leases are not to your advantage rather for the advantage of the seller, and if you skip out he keeps everything plus the equity, plus you are responsible for all the repairs and upkeep, and yes they could sell it right out from under you as a commodity, so my advice is this.
It appears that you will save more money in getting a loan for $600.000, buy the building for $475.00, invest $100,000 in repairs and keep the rest for yourself.
Tell the bank you are a property investor:
Point out to the bank, that you have negotiated a lower purchase amount for the property. You also have a tenant ready to move in with a successful history as a Thai Rest and and is moving to a much more higher traffic environment and expect to increase their profit margin at least by 25% to 30%. Because of the lower price with-in a five year period the equity in the property should increase by 50% plus there is an economic upswing. Now notice, I said you buying the property as a Real Estate LLC company ..... not your Thai Restaurant company.
Tax benefits.... If you were to lease your property to the Thai restaurant, that is tax deductible to the business. That lease should be higher then the payment on the loan.
If the bank refuses to provide you seed money, there are private real estate investors that will, at a higher interest rate, but once you prove to the bank in one year you can manage the payments with a higher interest rate, the bank would be interested in giving you a lower interest rate loan.
When you buy the property, you want to be able to put on the contract of purchase on the property that you can also assign the property to whom ever you wish at any time in the future. This way you can transfer the property from a LLC to your Thai Restaurant when the loan is paid off. Example...Real Estate LLC or Assigned.
I hope I was helpful to you. Some states have different laws, but this might give you an insight, you need to make a profit, not be profited from.