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Posted

I'm going to start negotiations this week on lease. It's a 2500 sq ft warehouse style building. Has office and 2 big bay doors with good high traffic road frontage(top 2 in town). The listing agent told my agent and I one of the other units in the complex got approved for $4 sq ft gross plus sales tax so that is my target price. Does anyone have any suggestions they wish they negotiated when the signed their first lease.

 

I'm looking for:

-3-5 year with option to renew

- I would love to limit my personal guarantee to the least amount of time though my hopes aren't that high(bank owned)

-CAM fee is included as well as waste

 

 

Any advise is always appreciate.

Posted

Lot's of variables go into lease making it somewhat unique for everyone. Not sure what does the sales tax doing in the lease, but again, different state different terms.

 

Looks like you are starting from the scratch, was there a similar business there previously? If it's a good location, why it failed? would be my first question...

Do you have a business plan and does that include $10k a month?

Not knowing your market it's impossible to say if it's a good deal, but I'd be inclined on getting another opinion on $4 a sq ft. Call someone else witha similar listing and see if the price is similar.

 

Posted

Fl is working on eliminating sales tax on commercial/short term leasing. $4 is a pretty fair price for location. This unit has been vacant for years and there is successful transmission place next unit over. Business plan has even written for over a year. And we are working with some mentors from other areas that have been a great help. Just looking for some advice from within the industry for any "I wish I did this" type situations .

Posted

The only "I wish I did this" for me personally is

Going for a shorter lease term a 3 year instead of 7 year and a two longer options like two 10 year options instead of one 15 year option.

Owning your own place is another, hoping it is still achievable for me and others.

Posted

In my last lease for a vacant building that was empty for well over a year I proposed a 3 year lease at a per month rate, but I would give first, last and 1 month security at the signing, but I wanted 1 month free, the 3dr month I was in the building. This gave me a slight break in the outgoing funds on a start up business. It was to be a triple net lease and I wanted 2, 5 year options to continue at the end of the first 3 years. Since it was empty, I felt I had some bargaining power and if I had to I would forgo the free month, but he gave it to me to just get someone in the building. I had a 6,000 sq ft warehouse type building with other smaller shops on either side of me and I paid $1800 per month plus taxes and any upgrades I did to the building. Second lease we went to $2,200 and third lease went to $2,500. I ended up trying hard to buy the entire building but never got him to let it go.

Posted

Make sure you take into consideration what repairs and maintenance you will do on the building, and which ones are the responsibility of the owner. For example, in my lease, i will pay repairs on the heating/A/C system, but if the unit need replacing, that is the owner's responsibility. Also, It doesnt hurt to try to put an option to purchase in the lease, so that if you do want to buy the building, you can.

Posted

Partners and landlords are bad news.

.

 

Agreed. For the price you are renting at ($10k/mo), you could buy a building for $1.8M and cover the mortgage. That much cash will get you a brand new 12 bay garage, fully equipped with latest everything, on a very busy road in a major city.

 

Only lease if you absolutely have to.

Posted

You might want to look at capitalization rates generally as a rule of thumb good cap rates are usually in the 6-8% range (cap rate is annual rental income divided by purchase price) in other words is the building worth 1.8 million as Wes pointed out? 7% of 1.8 million is 126,000 divide by 12 (months ) is @10,000 a month.

  • Like 1
Posted

It's $4 sq ft annually. Lease would be 2500x4/12= $833 month. Very low cost.

 

Building cost to buy is 91k but i would have to pay cam fees and insurance. For now this is my best choice I will have first right of refusal if sale is offered.

  • Like 1
Posted

It's $4 sq ft annually. Lease would be 2500x4/12= $833 month. Very low cost.

 

Building cost to buy is 91k but i would have to pay cam fees and insurance. For now this is my best choice I will have first right of refusal if sale is offered.

hahaha,

that's why they say never assume ha?

At that rate, you may be better ranting i guess. Or maybe it make a lease with option to buy if you feel like it.

Posted

That makes more sense, however that is still a cap rate of 10% roughly. You mentioned the location was great and sometimes if that's the case then it's worth that alone in regards to advertising

  • Like 1
Posted

It's about %10 less the other cost i would be responsible for. Mainly 1.5 sq ft cam and other random assessments. I do want to purchase but I need my cash for startup cost. The listing agent has done a very poor job on the listing and it's very hard to get info about purchasing. This should work to my favor and I don't foresee then building selling in the near future.

Posted

It's about %10 less the other cost i would be responsible for. Mainly 1.5 sq ft cam and other random assessments. I do want to purchase but I need my cash for startup cost. The listing agent has done a very poor job on the listing and it's very hard to get info about purchasing. This should work to my favor and I don't foresee then building selling in the near future.

 

Great work on the low lease rate! Sorry we jumped to conclusions early on.

 

If you are going to put any "lessee improvements" into the building, I would recommend stating it up front and asking for the lessors to place either a no-sale time period in the contract (ie 3-5 years) or a right of first refusal should they decide to sell. You do not want to spend a lot of money installing lighting, signage, oil collection, etc. on site on the vague hope that the building does not sell for awhile. It needs to be in writing that they either cannot sell the building for a period of time or you get first dibs when they do decide to sell it.

 

Your town is fairly small (assuming Leesburg here) at 15k residents, so word-of-mouth typically means more than in a larger city where location reigns king. With that said, your location and price sound like a great deal!!

  • Like 1
Posted

 

Great work on the low lease rate! Sorry we jumped to conclusions early on.

 

If you are going to put any "lessee improvements" into the building, I would recommend stating it up front and asking for the lessors to place either a no-sale time period in the contract (ie 3-5 years) or a right of first refusal should they decide to sell. You do not want to spend a lot of money installing lighting, signage, oil collection, etc. on site on the vague hope that the building does not sell for awhile. It needs to be in writing that they either cannot sell the building for a period of time or you get first dibs when they do decide to sell it.

 

Your town is fairly small (assuming Leesburg here) at 15k residents, so word-of-mouth typically means more than in a larger city where location reigns king. With that said, your location and price sound like a great deal!!

 

No worries. we included in the intent to lease for us to have first right of refusal. and a 2 year lease(realtors suggestion) with 2 year option to resign at same rate. I am not sure they will accept such a short lease but it limits my personal liability.

 

We looked up the tax records when we put in the offer and the listing agent was off base on square footage. It looks like its about 3300 sq ft which is actually better for us. We will measure ourselves during inspection and iron out the final before official lease is drafted.

 

Town is about 20,000 residents many retired. We are located near The Villages, largest retirement town in the word. A lot of the residents live in communities that mimic The Villages without the large cost. Seems many seniors take better care of their cars than average.

 

 

Again, everyones advice is welcomed.

 

  • 1 month later...
Posted

Update: Over a month later the bank finally got back with us on our offer (I am glad they work so quickly and diligently). They want $4 a foot plus CAM fee ($1.55) so about a %38 increase over my offer and what the listing agent "claims" another unit was approved for. I am been put off by the lack of respect for time from the bank and CAM association, which is no surprise coming from a bank.

 

Now since the price is in another category we are going to make an offer on a 6 bay shop that includes a bit of equipment. This time we are dealing with a private owner and no corporations. Still a stubborn old man but he cannot be worse than two large corporations. He is asking $2000/gross a month with 2 lifts, bulk oil drum, waste oil drum, trans jack, compressor.

Posted

Location?

a few miles from the other place on Main st. One of the few main roads coming through our town and the only one that leads to the interstate. Not as much traffic but 150ft of road frontage and a huge landmark (bowling ally) next door. Still a high traffic road. We are deep in negations and are closing in on a price. He is very quick in responding(actually in person with my realtor). Should hopefully have "contract to lease" agreed to tomorrow.

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  • Have you checked out Joe's Latest Blog?

         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.
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