Hi,
I am trying to value a building that will soon be auctioned off in a small town in Pennsylvania, housing a restaurant. The restaurant has been in business for over 5 years, and there is over 10 years left in the lease. I know what the gross income will be. I am looking at the lease, and the landlord is responsible for:
1) The foundation, lateral support, roof, walls, floors, gutters, downspouts, sewage and plumbing systems, and all structural and exterior portions of the building, including sidewalks and parking areas.
2) Fire and liability insurance policy.
The tenant is responsible for all other expenses.
Is this what's called an NN lease ?
I know how to estimate #2 (call insurance agents), but how do I estimate the #1 costs ? I guess it's fair to assume that the roof will be replaced once during the lease. How about the other items ?
I am trying to decide my maximum bid before an auction to buy the property with no contingencies. I have no right to inspect or anything like that. Are there standard averages I can rely on to make estimates ?
Also, what cap rate is such a property likely to command down the road, if and when I decide to sell it ? Is 9% a reasonable estimate for a small town in Pennsylvania ?
How much does a nice roof for a 1500 square feet restaurant cost ? By nice, I mean the kind you put on just before selling.
Is there an online tutorial that shows, step by step, how to enter the estimates into Excel and get the present value of the discounted cash flow (cash flow including NOI for each month and final sale price) ?
I can't give much details yet, since I signed a confidentiality agreement before seeing the lease.
One final question: which kind of direct lenders are best for a property with a purchase price of about $150,000 (and worth, I believe, a little more than that), and a prospective owner with no experience at all in commercial real estate ? My offer won't have a mortgage contigency, but I will have 30 days to close if I am the successful bidder. Are there lenders who would give me a commitment letter before I bid, at little or no cost ? Right now, I am limiting my bid to the cash equivalents I have, plus the amount of money I can get from my credit cards.
Thanks in advance for any ideas.
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