Please help me figure out renting a restaurant space!
I don’t want to ask a realtor this question for fear of sounding so inexperienced they don’t want to rent to me. But don’t know how I’ll get started if I don’t understand these things -


Key includes 
1375 sf with a little yard 
Basement full walk in box etc 
Vented - gas kitchen 
Terms - flexible
Previous tenant had liquor license
$7300 rent asking 
$80,000 key money asking
vacant, we can put a sign in window and list online

I googled key money and it basically just seems like a lump sum you give a landlord? Is it like a deposit or do I pay $80,000 and then pay the 7300/month rent on top of that? 
Thank you!!
[{"id": "g0k401p", "text": "What state is this in?", "replies": [{"id": "g0k4k38", "text": "Yeah the market you are in will provide some necessary context for sure", "replies": [{"id": "g0k9k1v", "text": "NYC - we\u2019re in Brooklyn", "replies": [{"id": "g0l2qzw", "text": "It's the money to get the key to get in the door.  Could be negotiated as all or partly a deposit.  It's a chunk.  Could be negotiated to be partly improvements.  Does it come with the liquor license?  If so, do you have to be vetted by the licensing authority? If so, how long does that take?  Are you going to be paying rent during that time?  Not paying rent during that time?  Credit during that time?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g0k50lq", "text": "I work in CRE but not so much with restaurants. I found this online:\n\n\u201cIn the restaurant business, key money may change hands when a business owner wants to sell the remainder of her lease together with any on-site equipment to try to get her investment back\u201d\n\nI\u2019m still not entirely sure but maybe it\u2019s to account for you getting the space already furnished with kitchen equipment? Also what market are you in that you\u2019re paying $63.70/Sf/yr in rent?", "replies": [{"id": "g0k9if7", "text": "Haha it\u2019s Brooklyn. Pricey!", "replies": [{"id": "g0kejif", "text": "I guess I should have guessed that", "replies": [], "depth": 3}], "depth": 2}, {"id": "g0kjkk9", "text": "It is very common for business to be bought and sold when the land doesn't change hands (is lease is assigned).\n\nLeases do have value, called a leasehold estate. They actually can be mortgaged (borrowed against) and of course sold, BUT THEY ONLY HAVE VALUE IF THEY ARE BELOW MARKET.\n\nA few questions for you are, is this a turn key business you are buying with employees and that liquor license? Those may also have value. If not, how much cheaper is your rent per sq ft compared to market, and for how long (when is the next renewal).\n\nI highly suggest you hire a commercial realtor who specializes in restaurants like this to represent you. Everything is negotiable my friend.", "replies": [], "depth": 2}], "depth": 1}, {"id": "g0k54h4", "text": " $80k as a deposit?  Yikes.  I\u2019ve owned about 5 restaurants and have paid at most a security deposit equal to one month.  I remember my friend from NYC said his landlord asked for \u201ckey money\u201d to secure his apartment since the market is very competitive but I think it was more of an under the table type of thing.  Either way,  don\u2019t give them $80k just cuz it\u2019s built out.  As a matter of fact,  ask them for TIA (tenant improvement allowance). This is where you can improve the property to fit your needs on the landlords dime.  Sometimes they will roll the TIA into your monthly lease payments.", "replies": [{"id": "g0kp0x7", "text": "But if the the kitchen is there and it's already vented, key money makes sense.", "replies": [{"id": "g0lqssr", "text": "Not to me.  But then again I don\u2019t know what\u2019s common in your area.  I have operated in Texas and New Mexico and I just haven\u2019t heard of having to pay $80k for a deposit on a restaurant space along with the monthly rent even if it is built out.  Seems to me like the landlord thinks that since they built it out with all the amenities that whoever renting it should be paying a premium but the fact is that a restaurant is risky and the operator of that said restaurant could shut down in less than a year if they don\u2019t have cash on hand (like $80k).  Granted,  a hood system is pretty pricy but I\u2019ve had properties where I had to build out my own hood system and the landlord provided some sort of incentive for me to improve their property and I\u2019ve had locations that had full equipment (turnkey) where I just paid the deposit and monthly with no huge initial lump sum.", "replies": [{"id": "g0lr6ri", "text": "But it's not a deposit. A deposit is a deposit. It has to be kept in a separate account, you're entitled to the interest, it's for performance on the lease, you get it back at the end of the lease, etc...\n\nKey money is so you don't have to build out a kitchen space on your own. If the kitchen and hood cost, say, 100k, then 80k key money makes total sense. As a tenant, you save 20k, and you get the benefit of the kitchen and hood for 5 or 10 or 15 years, whatever your lease term is.", "replies": [{"id": "g0lrryy", "text": "Is this a brand new build out?  I could see it making sense if the landlord was gonna build it out for you with close to brand new items but restaurant businesses are almost guaranteed to fail in a few years so it seems like the landlord probably knows this and wants to squeeze the tenants for as much as they can and then do the same thing to the next guy who comes along with a dream.  Again I don\u2019t know where this is but I could totally see this as being a norm in NYC where space is limited and demand is high.", "replies": [], "depth": 5}], "depth": 4}, {"id": "g0u560s", "text": "I'm a commercial broker in Southern California. Five to Six figures of \"key money\" is not uncommon for a improved (built-out) restaurant space here. When I list restaurants that are second gen (built out with things like a walk-in, hood, etc) I usually just factor that into the rent over the initial term. If there is movable equipment (mixers, tables, chairs, etc) aka FF&amp;E (Furniture, fixtures and equipment) I'll typically list those for sale separately as a bulk transaction. Again, the key thing to remember is: (1) every geographical market is different, (2) marketing timing varies (such as now due to COVID) and (3) everything is negotiable.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "g0lp0wz", "text": "&gt;I\u2019ve owned about 5 restaurants\n\nYou have either owned five restaurants or you have not.  There is no \"about\" involved.", "replies": [{"id": "g0lppwi", "text": "Lol. Ok, to clarify I have owned 1 brick and mortar restaurant with 3 locations, 2 food trucks and 2 food manufacturing businesses.  I have had to lease space for all of them either through a shared commercial kitchen (1 of them) or my own kitchen(s).  Do you have something to add to this convo?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g0k7xiu", "text": "That\u2019s a fair question to ask and you can do it in a way like \u201ccould you give more details on how the key money will be structured?\u201d Implies that you\u2019re familiar but sometimes there are tweaks. Like in our market, modified gross has general implications but leases still vary on things like water bills, and nnn sometimes includes management and sometimes not.", "replies": [], "depth": 1}, {"id": "g0kcgyl", "text": "I've never heard of key money before. Maybe it refers to how much cash on hand they want to see in your financials before renting to you. No one wants a tenant to move and close up in 3 months because they didn't plan to lose money the first year as most businesses do.", "replies": [], "depth": 1}, {"id": "g0kdexa", "text": "Key is shorthand lingo for turn-key operation. Meaning it\u2019s already built out to open as a business on day one, so, yes, the money is for the existing build out and maybe some business value at that location. I\u2019m not in your market, so I have no idea if this is a reasonable ask by the landlord. In general, though, until the pandemic is over, I would only put that kind of cash into restaurant space or even consider opening a restaurant/new restaurant location if I was crazy wealthy and I was doing it as a hobby.", "replies": [{"id": "g0wlysv", "text": "So they\u2019re selling the business for $80k. I pose you this question: what do you think you are buying for $80k? The previous tenants failed ve venture? Don\u2019t pay this exorbitant amount. We are in a renters market. There will be an abundant of 2nd gen restaurant spaces available in the coming months/years. I would hold off \n\nFyi commercial leases typically will require first and last months rent (deposit) upon signing. That\u2019s it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "g0knlsd", "text": "Commercial real estate agent here. I know a little, but I\u2019ve never done a restaurant deal, plus I\u2019m nowhere near the NYC market. \n\nHere is was I believe this is. The key money pays for the equipment in the building already, and probably the liquor license too. If you don\u2019t have the liquor license, it would take a while to get it the traditional way. The kitchen equipment, and maybe POS equipment, can be worth every penny and even more than the key money we are talking about here. To be clear, this is a check that your write to the owner- not a deposit.\n\nConsider the alternative, commercial real estate usually comes as-is, (unless you negotiate a Tenant-Improvement allowance) so the alternative is finding an empty shell space and paying that cost yourself to build out the space, the ventilation, grease traps, and kitchen equipment by yourself. \n\nRestaurant leases are very location sensitive with pricing, but it doesnt sound unreasonable at first glance- having never worked in your state, and never worked on a restaurant deal.", "replies": [], "depth": 1}, {"id": "g0ko74k", "text": "am nyc realtor, \n\nfirst off, any agent right now would jump for joy if someone is asking questions about their restaurant listing. so never be afraid, if the agent is an asshole, ask another agent through friends to represent you. \n\nkey money is a lump sum you give the landlord. it is not a deposit, it is negotiable. especially if you have a solid credit score, money in the bank, and  some experience running a restaurant. \n\nhypothetically, you give them the $80k, pay a $7300 security deposit, then pay $7300 on top of that for first months rent.\n\nrestaurateurs clueless about real estate call agents all the time. don't sweat it. but also don't pay all that key money and rent money. those are pre-covid prices. a transferable liquor license doesn't hold the weight it used to because you can't have 100 people packed into your tiny 4 stool bar area anymore.", "replies": [{"id": "g0l36vg", "text": "&gt; a transferable liquor license doesn't hold the weight it used to because you can't have 100 people packed into your tiny 4 stool bar area anymore.\n\nLOL'd .   We call them Doug Schwetty's", "replies": [], "depth": 2}], "depth": 1}, {"id": "g0ku6pa", "text": "You are in the middle of a global pandemic, most restaurant owners I know are going broke, what's the hurry? There are going to be lots of opportunities. Get a qualified agent. You don't say if you are buying a business or buying a lease or what the money covers.\n\nI agree with the others who suggest you retain an experienced commercial Realtor with restaurant leasing experience as your tenant's agent. Regulations on things like can you transfer liquor licenses vary from jurisdiction to jurisdiction, also the rules relating to getting certificate of occupancy. Does it need a new health inspection, is it up to code, are you getting part of an existing lease or will you need a new lease and at what length and terms, what does the key money include, etc?  You will need someone to help you understand the complexities and liabilities, will you have to pledge personal assets? Could not only be expensive but risky too.", "replies": [], "depth": 1}, {"id": "g0m00y6", "text": "Key money used to mean money for the keys. In your case, it's money to the landlord just for the honor of renting the place. Where I am (not NY), we buy and sell restaurant businesses between the owner of the business (not the landlord) and prospective tenants. The tenant purchases the business and/or equipment and the lease transfers. \n\nIn your case, I would ask what that key money gets you. Can you keep or sell off the equipment when you leave? Does the license transfer (probably not if the tenant isn't there). \n\nWhere I am, it is sometimes justified to pay a landlord key money if there's super high demand for a space or if it's already outfitted, but as others have said here: the market just isn't like that now. Unless he's got tons of prospects begging him to rent, key money doesn't make sense.", "replies": [], "depth": 1}, {"id": "g0muej2", "text": "Please don't take this the wrong way, bit you get an experienced CRE professional because of the first statement in your post. You don't look silly - everyone is good at something. You are a chef/cook, they do real estate.\n\nPay them, feed them, and go do well!!", "replies": [], "depth": 1}, {"id": "g0u5np0", "text": "Key money is quite common where I'm at (Southern California). It is not an increased deposit (as you do not get it back), it is literally an up front amount due, in addition to rent and security deposit. It's typically used for an already improved space and/or highly desirable location. Another way to look at it is you \"buying the improvements\" OR you can look at it as your \"price to play\".... aka \"no money no honey\" lol.\n\nRemember everything is negotiable!\n\nGood luck!", "replies": [], "depth": 1}]