NNN Lease ?
I am considering leasing a retail space and the lease is NNN. One of the stipulations in the lease is as follows "HVAC Systems: Landlord warrants that the heating ventilation and air-conditioning system within the demised premises is in good working order and condition at the execution of the lease. Tenant is responsible for all repairs and shall provide the Landlord with evidence of periodic maintenance thereafter." Is that a standard clause for a NNN lease?
In a true NNN lease you pay for absolutely everything.
Chris
If you have $2-3M in cash, how can you not have at least $150k in interest or dividend income per year? Have you considered buying homes for cash then doing cash out refinancings shortly after purchase. This will build the credit as you go.
There are two ways to finance.
1. You must use a quailfied borrower. Banks do not loan to an LLC. This gives you the lowest interest rate.
2. Once you have some history you can get a commercial loan. Commercial rates are higher.
Try B of A. They will do 85% cash of refi for non owner.
They will lend to foreigners.
Why are you having problems finding a lender?
I have had NO problem with financing, and like you I am Canadian.
Not exactly the same, but I have purchased several lots totalling over 2600 acres with a dozen partners. The deal was set up as an LLC. All partners were friends and family except a couple friends of those friends. Every member has equal rights relative to the amount of money contributed. The LLC is manager managed.
An extensive operating agreement was critical- we paid over $3000 in legal fees but it was so worth it! Those 32 pages contained answers to scenarios we had never considered but later came up. The key is to use the best attorney available, someone who has had a lot of experience and so knows what sort of problems may arise. We only had to pay $185 an hour for the best we could find, so it is not necessarily more expensive- especially since he could just cut and paste from previous work rather than having to come up with everything fresh.
I would forget the projections- just this is the deal, this is what we plan on doing, this is what the manager will get for overseeing the project, your percentage of the profits will reflect your contribution. Problem I forsee is that as you are contributing property as opposed to cash, investors may question value of property since essentially they are "purchasing" it by allowing you to use it as your capital contribution.
Basically my advice is to locate a qualified attorney, tell him/her what you are trying to accomplish, and let the attorney take it from there.
Chris
I sure 2d what ypochris said.
Lots of possible trouble spots in doing such a deal and these would be seen and covered by a good agreement among all investors...lawyer done of course.
What do you want out of it?
Would you think 50/50 is fair?
Who is taking the financial risk?
To me, it all depends on the level of involvement you want.
creating and assembilage and getting entitled and then selling is good money.
Beeing in the game until the last tentant is more money and more risk.
personal risk reward tolerance issue.
What are you basing the $1.8mil value on.......commercial property is only worth what you can rent it for. From the looks of it this one is negative cash flow even with 20% down and a purchase price of $1.2 mil. You didnt give me much info but if I had it all I feel I would be right.
As a rule if a properties cap rate is lower than the rate you are paying for yor funds you are negative cashflow. Unless you can get considerably cheaper you would be better off renting somewhere in the area.
Owning is nice, but you still think of the building as a stand alone investment and if the numbers suck you pass it up.
Good Luck and Id be happy to take a look at the scenario with more info.
Well the property actually has two parts. The large side which I mentioned before and a smaller side that would rent for about $3k monthly. IF there is any specific info you may need let me know. Also what is the formula for finding what a commercial property is worth?
get a clear answer of what can be expended and what needed to be capitalized.
Also, it may be tricky putting the property into an LLC. If each of you own x%, then you could create and LLC where ea. of you owned X% of the LLC.
It seems that the LLC would need to "buy" the house from you, or you contribute it as your share of a capital contribution, and the partners need to come up with an equal value (maybe thru their sweat equity, and materials).
If you are in fact flipping this property, then all your expenses are going to be deducted from the sale price, and the remainder will be profit. You only have to worry about what is considered basis and what is an expense if you rent it out or hold it for long term appreciation.
Chris