Case Study: Purchasing A Single Tenant Commercial Property With An Active Lease

May 9, 2018

Successful commercial real estate transactions are delicate and require careful handling. If there is an active lease, this process requires even more attention, as there are potentially 3 parties involved in the transaction.

In these situations, the best route forward is to get a Buyer’s Agent, so that you don’t end up stepping in a complex relationship that can go sour in more than one way.

This is Westwood’s specialty. With over 18 years of dealing with commercial property transactions, we’ve seen all sorts of scenarios and successfully navigated toward a good deal for the buyer.

One such case was a client that wanted to move into a single-tenant commercial property with a possible lease deal, so there is immediate positive cashflow. The client had a set budget and a set area.

Here I’ll explain the process from the first contact with the client to the successful closing of the deal.

Westwood can advise you and guide you through the financial analysis and demographics and point out the strengths and weaknesses of a specific market area (wherever it may be in the US market). By doing this, we can release you from some pressures and tensions, and we can ease off some of the work that would otherwise fall on you.

First Contact

The client filled the online application form on our website. He noted that he was interested in buying a commercial real estate property in Rock Falls, Illinois. I, Jason Simon, called the client and talked a bit more about the client’s expectations and their previous experience in commercial real estate investing.

Assembling The Property Shortlist

After we discussed the desired outcomes of the next transaction, I spent some time researching for potential good deals in the Rock Falls area. We all take this step of seeing what is available on the market. We also go a step furtherinf calling known owners that may be interested in selling.

It took a few days to do the research and put together a short-list of interesting properties that were within the area and budget that the client specified. Some were Class A, some Class B properties. You can find out more about these classifications on our website.

The client wanted a clean property that has the best potential for cashflow, which narrowed down the shortlist to only a few Class A properties.

The Final Pick

After narrowing down the list further, I spent a bit more time looking through the history of each property, as well as potential zoning issues that could hurt the cashflow potential of the property. We finally got to a single property that was the best match.

This was a single-tenant commercial property on a nice 0.81 Acre lot. The building itself was just over 3.000sq ft and offered close to the desired $100.000 income a year. The good thing was that the asking price was below the maximum budget for the client, so we knew that there’s a solid chance this place would be the winner.

Closing The Deal

As the place was just the right size, under budget, but also under the desired positive cashflow, we had a good starting point.

Negotiating with the owner revolved mostly around the final price, since the property already had a clean NNN Lease deal with Arby’s.

After a few conversations with the seller’s agent, we got down to a $ 1,375,000 with a solid  6,87% CAP rate.

The new investor was pleased with a renewed NNN Lease with Arby’s that secured a solid $94.500 annual income from the property. The best thing about the deal was that the new landlord didn’t have to do anything with the location. The tenant basically renewed the NNN lease for another term of 5 years, which meant that they are taking over responsibility about the maintenance of the place and any expense would be covered by the tenant.

The deal included that the lease amount increases by 5% every 5 years and that the landlord is free from management liabilities.

And that was it! Happy client, happy tenant.

If you are interested in negotiating a similar deal, please feel free to fill in the free online consultation form on our website. My colleagues and I will gladly help you find a commercial property that meets your requirements.

Why Work With Westwood Buyer’s Agents?

Thanks to a long history of successfully closed commercial property deals, our team is well known in the real estate industry. We are here to answer any of your questions and concerns and to advise you on commercial real estate transactions.

Whether you have your own list or properties you’re interested in, or you want help in finding the right options, we can help.

When it comes to negotiating terms, we make sure you, the buyer, are protected from all sides.

When it comes to submitting a Letter of Intent, you get the added value of our positive brand image among seller’s agents. Over the years, seller’s agents learned that when Westwood submits a Letter of Intent, it’s as good as a closed deal. We make sure buyers can finance the deal, and this brings peace of mind to seller’s agents.

This in turn, means that we can even submit a lower offer for the property. Because of our reliability, Seller’s Agents will jump at the opportunity to work with us. Which for you could mean saving hundreds of thousands of dollars on your next commercial property purchase.

For more information, feel free to contact us. Once we get your application, one of my colleagues or I will be in touch with you to offer a free consult, and see if we can help you.

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