I am an amateur landlord with only one commerical tenet
Update: I can't thank this community enough for lending advice on my solo commerical property.. After reading so many helpful suggestions. I have decided not to sell my little building and renegotiate the rent in October.  Although I do not do this for a living, the advice I received made me realize how special my situation is and how a may be able to really build a nest egg. Your sub rocks 


So I came into commerical property because I was a tenet. The Owner died, I bought the building "as is" from his children. Years later, I closed my business and started renting the building for the first time, I was "and still am"  green as a commerical landlord. My only tenet is now wanting to buy the building, even if i wanted too,  I wouldn't know how to price the building or if its a good idea to even try... on one hand , I want to support another women in business but I honestly dont think she can even come up with captial to buy this building, I would love any advice and if I don't sell must  increase the rent but I'm not sure how much, so far I'm charging $3000, 2000 sq ft for restaurant/bakery in south texae and I only increased rent last year for the first time since 2018 to 500 so original rent was 2500 and I increased it 2 years ago to $3000.
[{"id": "i3fb76g", "text": "The lease is up in October 2022", "replies": [{"id": "i3fldle", "text": "This is a good time to get this finalized. You need 6 months for both of you to make plans.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3fc2de", "text": "It sounds like you should contact a commercial real estate broker to help both of you with this.  Hopefully, there's more than one such broker in your area, so interview more than one. (i.e., shop around.) Offer to split the cost with the buyer. Sure, a broker will cost you money, but not as much as an expensive mistake would.", "replies": [{"id": "i3ia7l7", "text": "Uhm, isn't the broker just incentivized to just close the deal and get their commission in such a case?\n\nI don't see how that's advantageous from the seller's PoV apart from getting the paperwork correct", "replies": [{"id": "i3idgb7", "text": "There are plenty of incompetent and/or dishonest brokers out there. There are also a lot more reputable brokers who care about their reputations and the welfare of their clients and their communities. \n\nI suggested that she shop around for a broker. She apparently doesn't know anyone among her friends and business contacts to ask for help.  Shopping for a reputable broker makes more sense to me than does asking a bunch of Redditors. Feel free to disagree.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3fe81o", "text": "You can get an appraisal and agree to sell it at the price. It's not always the market price but may be the easiest. You can also try to find the local retail focused broker and pay them a fee for a bpo. \n\nRental price is more complicated. Harder to get comps and depends on other factors/concessions", "replies": [{"id": "i3jlg9g", "text": "An appraiser who is already writing up an appraisal on the building will likely give you their opinion on the rent if they are familiar with the area", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3ffz3m", "text": "I would get an appraisal done on the property to get an idea of sales price and an idea of market rent.", "replies": [], "depth": 1}, {"id": "i3fiz7z", "text": "First, get an appraisal done. Then see what the difference may be between the appraised value and your tenant's offer. Ask yourself how much you care about the potential 'loss' if tenant's offer is way below appraised value. Go from there.", "replies": [], "depth": 1}, {"id": "i3flg8y", "text": "I\u2019m in Dallas. Let me know what city and I can probably help you.", "replies": [{"id": "i3frmmy", "text": "Very south, corpus christi", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3fnwmr", "text": "I don't see an actual question.\n\n(**Edit**: Down voted for stating the blatantly obvious.  Here's another:  It'll be easier to come up with useful data points, if there's an actual question).", "replies": [{"id": "i3fzno7", "text": "I didn't down vote you. I'm here for your advice. My question is a 2000 sq ft building has never had equivalent comps when the city and I have contested the taxes. Is it smarter to get a quote on the price of the building through  a real estate comps or to rebuild from the ground up through a contractor. I feel like I asked a dumb question but I want your advice regardless", "replies": [{"id": "i3gtp3d", "text": "*\"Is it smarter to get a (valuation) on the price of the building through real estate comps or to rebuild from the ground up through a contractor.\"*\n\nThat's a *spectacular* question, and the answer of course, depends on your local market, the quality of current repair, your ability to hold and maintain (or improve) said condition and, moreover, what you're looking for: Cash (for any reason) or long term cash flows.\n\nAll of those will need to be asked before you can come up with the right answer.\n\nWe can deduce from your post that the building, in its entirety, is 2,000 sf so, unless you're in an area that allows you to portion it off profitably in to 2, 3 or 4 smaller units (when one tenant leaves, you still have 3/4's of the building producing revenues), you're stuck with a 1 tenant building.  That's dangerous unless you're an experienced owner with a cash reserve (because when that tenant leaves, you're left with zero revenues).\n\nIf *any* tenant leaves you...you are without income for some duration, and the asset will potentially require a fairly substantial (to you) tenant improvement (read: $$$$$$) to re-lease it to a new tenant with different needs.\n\nDon't have the $$$ to provide a proper tenant improvement to entice a new tenant?  You're likely going to end up with a lesser quality tenant.  Is that always true?  No, but, like Vegas, the odds begin to stack against you rapidly.\n\nIt's a small building so, unless you're in a hot market, chances are you bought it for a fairly low price.  The children may have been hungry for cash, but just as likely, they watched their parent(s) try to lease that to 1 tenant over the last 30+ years and said \"*no thanks*\".\n\nHaving bought it right, you may simply want to hold it and keep producing cash flows.\n\nThere are at least 40 different criteria that are important only to you that this very unique asset will have a purpose for...and not to any other owner.  Those criteria are essential for the determination as to how best to utilize the asset.\n\nHere's one: It's only a 2,000 sf building but...can the land support more structures?  Perhaps a mini storage? Do you have an Uncle, boyfriend, husband, buddy .... anyone ... that can help you build a structure on it?  One of the easiest to build is a slab on grade mini storage. In house, built on weekends, you can build one for under $50.00 a sf in almost any area of the U.S. (in some places, half that). Or, fence off the yard for boats and motor homes.  There is *always* money leaking out of every property.....it's your job to find it. A fence, some crushed rock and a sign can cost you merely a few thousand dollars.  It can generate that much a month, in some cases, a week.\n\nAnd not one toilet to fix, or roof to repair.\n\nIf the land can support additional structures, and your existing business throws off cash, perhaps this creates a unique opportunity for you to invest your free cash for the next 20 years building a true nest egg and viable asset.\n\nCould you build a second floor on it?  Would the city allow that?  Would the market support that? Maybe the lot slopes such that, with nominal grading, you could enter the added floor on grade (meaning...no stairs or elevator needed).\n\nThere are dozens of options under this scenario.  Some absolutely horrible, some, if done right, every other buyer in town will say \"*damn...how did I miss that?*\"\n\nAs nice as it is to help another woman in business out, you aren't, as they say, your brothers (or sisters) keeper.  You already have concerns as to her financial acumen.  That's a red flag.\n\nThis isn't your opportunity to do good.\n\n*It's your opportunity to do well.*", "replies": [{"id": "i3oo7wy", "text": "My lord you have good, sound advice and I'm forever grateful for it. I contacted my tenant and told her I could no longer consider selling her the building we will renogiate rent in October, but you've given me so much more to consider for the future,, thank so much", "replies": [], "depth": 4}], "depth": 3}, {"id": "i3hk9cg", "text": "The assessed value can be irrelevant.  I have a building assessed at 275,000 but get $4200 in monthly rent. I\u2019m would not sell for less than $400,000 or about 10x gross rents. I\u2019m not selling. Commercial is more valued on financial, location, etc", "replies": [], "depth": 3}], "depth": 2}, {"id": "i3fzreq", "text": "Same, just a lot of words.", "replies": [], "depth": 2}, {"id": "i3ggox7", "text": "You're getting down voted because you can't read between the lines.", "replies": [{"id": "i3grz5q", "text": "A *potato* can read between the lines.  Part of her answers lie in getting clarity on what she's searching for.\n\nShe came to a room where most of the people here understand real estate in their sleep.  She, most clearly, doesn't.  If she doesn't know what she's asking for, she'll never understand the solution.\n\nHalf the thread here has given her answers to questions she never asked.\n\nShe doesn't need to be told *what* to do.\n\nShe needs the *tools* to determine *how* to do, what only she alone can determine is most appropriate for her needs.", "replies": [{"id": "i3hf6xc", "text": "I bet you're a blast at parties.", "replies": [{"id": "i3hgneh", "text": "My current rate is $7,000.00 a night.\n\nFor you; $10,500.00.", "replies": [{"id": "i3ibylh", "text": "Sounds like a steal :)", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3fokci", "text": "\\*Tenant. \n\n\"Tenet\" is a principle, belief, or doctrine.", "replies": [{"id": "i3fr3g0", "text": "Thank you for that correction, so often people are shy about correcting grammar. It's corrected in the old brain from here on out, thanks love", "replies": [{"id": "i3fyr27", "text": "You are a sweetie pie. Thanks for the gracious reply.", "replies": [], "depth": 3}, {"id": "i3hi8au", "text": "See my comment about the amount of tax you will pay as you recapture the depreciation you deducted on your taxes. It is added back in and you pay tax on it along with the gain in value. These taxes can be substantial.", "replies": [], "depth": 3}], "depth": 2}, {"id": "i3hizkt", "text": "Good bot \ud83d\ude09", "replies": [{"id": "i3hj14r", "text": "Are you sure about that? Because I am 99.99998% sure that KrishnaChick is not a bot.\n\n---\n\n^(I am a neural network being trained to detect spammers | Summon me with !isbot &lt;username&gt; |) ^(/r/spambotdetector |) [^(Optout)](https://www.reddit.com/message/compose?to=whynotcollegeboard&amp;subject=!optout&amp;message=!optout) ^(|) [^(Original Github)](https://github.com/SM-Wistful/BotDetection-Algorithm)", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3g4gin", "text": "Commercial isn't as easy to buy as residential. A bank will still want 20% down if they were to get a loan and not buy in cash.   \n\n\nCommercial property is typically priced as a multiple of the NOI (net operating income) rather than just getting an appraisal like a normal house, then you'd try to find something comparable that sold recently. Hard to do with commercial, you need a broker to help so you don't get screwed and sell a $5 million property for $500k.", "replies": [{"id": "i3hjwrz", "text": "She has owned this a while and values are high. I have run into many people over the years sitting on a property value 10x what they thought as they just never paid attention because they weren\u2019t really investors just happened to own a property for one reason or another.  Btw in my city the apartment building and commercial broker (dudes family had the business 80 years) are putting values of 9-10x gross rents. Is that common?  They do a very detailed proforma that shows NOI, market rents vs current rents etc.   Is it common to use gross rents (I think it\u2019s GRM ?) to set sales price?", "replies": [{"id": "i3hkpfl", "text": "To be honest, I\u2019m not an expert in commercial. Maybe it\u2019s different for different markets, but I normally go by NOI because it gives the full picture. That broker you mentioned likely does too and the gross rents multiple is probably just a rule of thumb that works out to &lt;insert multiple&gt; of the NOI that\u2019s typical in your market. By full picture, I mean that obviously $10k in rent in one property might only net $5k profit annually where another may net $50k, ya know?", "replies": [{"id": "i3hkyog", "text": "Yea I\u2019m sure anyone actually buying looks at it multiple ways.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3g95eg", "text": "Either get an appraiser or get a CRE agent.\n\nYou can always figure out a baseline value using the income approach. Check this out: https://www.adventuresincre.com/acre-101-income-approach-value-income-producing-property/\n\nA quick and dirty way of roughly doing this: say your net operating income is roughly $2000 per month.  If similar properties in your area are trading for, say a 5% cap rate, by the income approach one would value the property at $24,000/5%=$480k. If for instance they trade for 8% cap, you\u2019re income approach valuation is $24,000/8%=$300k.\n\nSometimes CRE can be much more valuable than income approach would suggest (say if the property had significant redevelopment upside). Sometimes it can be worth far less if a new buyer has to put a lot of work into the property.", "replies": [], "depth": 1}, {"id": "i3ggh8n", "text": "Commercial appraiser here, based in Texas so I'm biased, but I would advise getting an appraisal done if you're concerned about figuring out a purchase price. Some appraisers won't give you the time of day if you're not a lender client, so you might have some trouble finding someone to do an appraisal, and unfortunately the people that will, might not be the best. There are not going to be great sales comps in Corpus, so it might be worth paying some local appraiser $2,000 to give you what appraisers call a restricted use appraisal to come of the value. Essentially that just means they don't have to waste a bunch of time writing up stuff to prove the value. Feel free to direct message me with any questions.", "replies": [], "depth": 1}, {"id": "i3hhykk", "text": "If you sell this building you will likely pay a major amount of tax. Your accountant will have taken depreciation every year. When you sell that gets added back and you pay tax on it. It can be a lot of tax depending on how long you have depreciated it.  You also pay tax on the gain in value of the property.  You also pay some settlement costs.  In some cases this entire amount can be 50 to 75% of your sales price.", "replies": [], "depth": 1}, {"id": "i3hiw17", "text": "Values are sky high.  Not sure about where you are but here in a medium city you can get an idea of value by taking the gross annual rent and multiplying by 9-10 for a sales price.", "replies": [], "depth": 1}, {"id": "i3iuvns", "text": "Commercial Realtor here. Your generosity will bite you in the butt because your income will be low. Look to an owner/user appraisal and maybe a SBA loan for your tenant\u2019s business to buy the building. SBA has low down options &amp; great rates. If you\u2019re a full time investor who could use some help on taxes, you could still do a Segregated Depreciation study for a home run. You\u2019d need a real estate investor oriented CPA to understand the benefits. Next, I\u2019d 1031 out of the asset, using an exchange accommodator into the right asset. A great Realtor makes you money! Feel free to reach out if you want to toss some ideas around! \ud83d\udc4d", "replies": [], "depth": 1}]