Quote:
Originally Posted by ErikLS2
Todd, I wish it were that easy, but it's a Walgreens store and it's in TX. The loans for these types of properties are kind of like bonds to the investors (lenders) in that they want all the return they signed up for at the outset. This means there's a significant pre-payment penalty, called a defeasance penalty. So, it rarely pays to sell (or refinance) early. The penalty on this property 4 years out from loan maturity was around $600K!! That's the price for getting a fixed rate loan vs. an adjustable rate. In the meantime, Walgreens is about as solid a tenant as you can get, it's a 75 year lease and unless this 100+ yr old company goes out of business it's guaranteed and it's NNN so there's nothing to do except make sure the money is in the bank every month. Oh, and we still get to depreciate the building and contents, even if Walgreens buys new ones!
Todd gave you some good advice. Some of the bigger firms that would know what your building is worth are CB Richard Ellis, Marcus & Millichap, and Hendricks & Partners. All should have offices in your area and any of them would be happy to give you an opinion of value and tell you all you want to know about your local market. In your situation though I don't think I would have them handle the purchase/sale. I'm assuming that you know the current owner (you're making lease payments to them right?) so there's no need for them to do so and their contracts are great at protecting them but don't do much for you or the seller so you really need a lawyer to review the contract anyway, and they get a healthy commission, mainly for putting buyer and seller together and it sounds like you might already have that part handled. I would highly suggest if you want to buy it that you just find an experienced commercial real estate lawyer draw up a contract and have the seller's lawyer review it and negotiate that way. You'll be much more protected that way too.
You probably know this already but I would also add that if you can swing it to own the building the tax benefits can be considerable, you have the business LLC (or however it's structured) lease it from another LLC (or similar entity), both of which are you. You'd basically just move money from one bank account to another and deduct a lot from your income taxes along the way. How the rich get richer! I wouldn't suggest you have one entity own both the business and the real property, but I'm not a lawyer and Calif is especially unique in it's laws for most of this kind of stuff so do your homework. Good luck!
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Erik, what is NNN? Also, thanx for the new word of the day, "defeanance".
On another note, while were talking investment stratagies,
I've been interested in purchasing some investment property here in the town of Dublin where my business is based. The buildings (as builts) and land here are too large for my business, just about everything starts at 2 mill and goes up from there. I just don't have the kohones to do it, it will be about 11,000 to 12,000 a month. And while we (the business) can swing it right now, i'm preparing for a slow down( i bought the business 20 years ago in a recession and went through the 09'/'10). So, using the past for guaging the future is what i'm talking about. We are in talks right now with our former landlord about relocating some of or all our business back to that site, for a savings of 60% less per sq ft.
Meanwhile, fully funding the companies pension(income tax differed), keep piling some cash into my diversified Dividend stocks, and continue to learn how to manage the growth.......thanx to this thread (Greg, yes i'm talking to you lol, thanx a BUNCH for you input!!!! Wish i would of heard it in my 20's LOL).