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Post by genny on Jun 18, 2015 18:33:04 GMT
DH and I have had our sign business for 15 years in August. We have rented the same building since the day we opened. We are well established here and have paid for this property at least once over in the rent we've paid over the last 15 years.
Our landlord has decided to sell this property and gave us first right of refusal. He has offered a good, but not stellar, interest rate with no money down (banks require 30% down on commercial loans, we would never be able to make this purchase if he weren't owner financing)
We have come to an agreement on price that we all feel good (not great, I wanted it for less but it *is* a fair price) about. An appraisal was done and I've talked at length to several real estate agents, appraisers and people in my community in the know about this area.
Part of me feels like it's a no brainer to do this, but part of me is apprehensive about the increase to our monthly bills, even though it's small. And being a landlord and having to deal with leaking roofs or AC that goes out in July or whatever else can and will come up as a property owner with tenants.
We are partnering with my sister and her husband. We are very close the 4 of us, and my biggest fear of all is something coming between us. We have talked about it ad nauseum, each of us laying out or expectations of each other as partners, our different ideas for this property in the immediate and far future and I feel like we are on the same page on everything.
The property is probably valued at an all time low right now because of the market so I feel like we're getting in a good time. Obviously you never know what the market is going to do, but we all feel like it will be worth more down the road because of current projects (and some projected, but not finalized, improvement projects the city is talking about).
Anyway, our out of pocket will increase monthly but not dramatically unless something major happens (like an AC unit completely dying or something like that) or unless one of our current tenants decides to move. Up front it will be a lot of sweat equity - cleanup, repainting, small repairs…and there are some big things we WANT to do, but dont HAVE to do right off the bat. But the long term possibilities when it's paid off give me hope for additional income down the road.
Am I nuts? No nevermind, don't tell me if I am. The papers are being drawn up now and while it's not officially too late to back out, it kinda sorta is. If he sells to someone else, we could be put out of our business 'home' fairly quickly so it's in our best interest to do this.
Tell me it's going to be ok!!!
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Deleted
Posts: 0
May 20, 2024 20:03:37 GMT
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Post by Deleted on Jun 18, 2015 18:35:18 GMT
It will be Ok. Sometimes you just need to JUMP! (even if you aren't sure you'll land!)
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freebird
Drama Llama
'cause I'm free as a bird now
Posts: 6,927 
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Post by freebird on Jun 18, 2015 18:41:21 GMT
the only thing that would worry me is doing it with someone else. If they file bankruptcy or have a judgment against them then you're all screwed.
Other than that, I say go for it. You can always sell it down the road if it starts to be a burden, but odds are good you won't even notice the extra payment. And don't forget the extra income coming in.
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IAmUnoriginal
Pearl Clutcher
Posts: 2,894
Jun 25, 2014 23:27:45 GMT
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Post by IAmUnoriginal on Jun 18, 2015 18:42:18 GMT
You'll be just fine.
FYI - something to look into with your tenants -- I've negotiated several commercial leases for our office. The A/C unit has always been our responsibility as the tenant, both maintenance and repair/replacement. If it's not set up that way now, when it comes time to renew leases, it's something to look at changing that can save you big money later.
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Deleted
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May 20, 2024 20:03:37 GMT
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Post by Deleted on Jun 18, 2015 18:48:09 GMT
You might also ask the former property owner for a list of current contacts for repairs. Who does he currently use to fix things like roofs/plumbing/HVAC? Hopefully that is something he would be willing to provide along with a prior repair log/warranties, etc. (Hopefully you had some type of inspection done on the whole place to understand any negatives that might exist)
You need to have a capital improvements budget because things will wear out over time. Just like in your home. So I would be setting aside some money so that you aren't hit hard all at once.
HVAC systems can depend on the way the property was originally built and I've seen them go both ways. So definitely read leases to make sure what the tenant is responsible for and what you as the owners are responsible for.
I know it sounds scary, but good knowledge and good planning at the start will help carry you through!
eta: you might also consider having the group pay for an extra insurance policy that pays to the business if one of the owners gets disabled/dies so that any ownership is not diluted in a personal event (much like mortgage insurance for your home). And you might have an attorney draw up papers now on what happens if 1/4 of the group wants out (divorce, etc) or how the asset would pass after death. Again working these types of issues out now in writing legally will serve you well later on.... |
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Post by heartland on Jun 18, 2015 19:09:45 GMT
I know it seems scary, but overall it sounds like a good move for your business. Good luck!
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calgal08
Pearl Clutcher
Posts: 2,519
Jun 27, 2014 15:43:46 GMT
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Post by calgal08 on Jun 18, 2015 19:36:44 GMT
I hope you're having an attorney draw up the partnership paperwork (between you and your sister). Believe me when I say, some of the nastiest business issues I've seen (I work in corporate law) have involved family. Right now you're all on the same page, but things can change very quickly. What if one of you divorces? What if one of you can't make the monthly payment? What if one want to update the property and the other doesn't?
I know legal fees are expensive, but in the long run, it's worth it.
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Post by jesslee on Jun 18, 2015 19:48:51 GMT
Everything is going to be ok!
I wish I was able to do what you and your husband are doing. I haven't taken the leap yet. Your business sounds stable and this is wonderful for you.
Enjoy the process and enjoy your new adventure.
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Deleted
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May 20, 2024 20:03:37 GMT
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Post by Deleted on Jun 18, 2015 19:51:20 GMT
you should only purchase the building if it makes sense as a financial purchase on it's own, not for the bonus you might get by having a home for the business
i assume your business could always find another place to rent if need be?
i just question if you are making this decision based on an emotional fear about your business having no home, which wouldn't be a good decision
and not in a million years would i go into business with any family no matter how on page we all appear to be
i think everyone who says it will be fine is trying to make you feel better that you made the right choice
i think you have doubts for very good reason
its not to say the apocalypse is coming if you go ahead
after 15 years in business, im sure you will work out any issues that come up
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Deleted
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May 20, 2024 20:03:37 GMT
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Post by Deleted on Jun 18, 2015 19:52:51 GMT
I hope you're having an attorney draw up the partnership paperwork (between you and your sister). Believe me when I say, some of the nastiest business issues I've seen (I work in corporate law) have involved family. Right now you're all on the same page, but things can change very quickly. What if one of you divorces? What if one of you can't make the monthly payment? What if one want to update the property and the other doesn't? I know legal fees are expensive, but in the long run, it's worth it. this is a good idea but OP please consider this....who wants to take their sister to court to enforce a contract? |
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Post by eebud on Jun 18, 2015 20:15:28 GMT
I hope you're having an attorney draw up the partnership paperwork (between you and your sister). Believe me when I say, some of the nastiest business issues I've seen (I work in corporate law) have involved family. Right now you're all on the same page, but things can change very quickly. What if one of you divorces? What if one of you can't make the monthly payment? What if one want to update the property and the other doesn't? I know legal fees are expensive, but in the long run, it's worth it. this is a good idea but OP please consider this....who wants to take their sister to court to enforce a contract? IMO, if you are not willing to take partners, regardless of the relation, to court to enforce a contract that you all agreed to, then you should not go into business with the person. I would have a legal contract drawn up that covers as many things that you can think of in case the partnership with your sister goes sour. What happens if one couple wants out? What if one of the 4 people in partnership together want out? What if there is a divorce between either couple? What is someone dies? How is work divided up among the partners to keep the building in good shape? How are the bills divided when money needs to be spent to fix something. What if two members don't agree with what the other two members want to spend money on regarding the building? Are all partners equal partners? How is the partnership affected by two members of the partnership having their business in the building and the other two members don't have a business in the building? Do the two with the business pay more than the two without a business? Do they do more in repairs and upkeep? This list could go on and on. Talking about it is nice but it needs to be put in writing and all parties agree to it. |
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Post by annabella on Jun 18, 2015 20:22:02 GMT
I remember reading a post awhile ago from a pea who had a sign printing business who said it wasn't doing so well and thus her husband takes on other work. Was that you? Why are you partnering with your sister? Does she work in your business? Can you not afford to do this on your own and just hire her as an employee? Whose children will inherit the business?
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calgal08
Pearl Clutcher
Posts: 2,519
Jun 27, 2014 15:43:46 GMT
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Post by calgal08 on Jun 18, 2015 20:27:30 GMT
I hope you're having an attorney draw up the partnership paperwork (between you and your sister). Believe me when I say, some of the nastiest business issues I've seen (I work in corporate law) have involved family. Right now you're all on the same page, but things can change very quickly. What if one of you divorces? What if one of you can't make the monthly payment? What if one want to update the property and the other doesn't? I know legal fees are expensive, but in the long run, it's worth it. this is a good idea but OP please consider this....who wants to take their sister to court to enforce a contract? I've been in corporate law enough years to say you'd be surprised how many family businesses end in litigation. Even if they don't get as far as litigation, it's not uncommon for families to disagree and fight for years, costing thousands and thousands in legal fees. In fact, we have one matter right now where family members are fighting over a piece of commercial property, and this fight has been ongoing for probably close to 5 years now.
I really can't stress enough - make an appointment with an attorney.
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Post by genny on Jun 18, 2015 20:44:27 GMT
I remember reading a post awhile ago from a pea who had a sign printing business who said it wasn't doing so well and thus her husband takes on other work. Was that you? Why are you partnering with your sister? Does she work in your business? Can you not afford to do this on your own and just hire her as an employee? Whose children will inherit the business Not me. While we do take on work outside of the scope of what we normally offer if it arises, DH hasn't had to do any other work to keep us afloat. I did post some time ago (i think on the old board) about ideas for pumping up business (Facebook, other social media, etc.) and things to offer, like possibly the cutesy signs you see on etsy. I am always looking for other niches that can carry us through slow times, and there are always going to be slow times. It's just the way it is. We can afford to do this on our own, it would be a bit more of a stretch, but doable. We asked them if they were interested because we have talked in the past about finding some property to invest in together. They already own 2 rental properties and were looking to get into a commercial property. This kind of fell in our laps and by having them join us, it would ease the burden of upkeep, repairs, etc. They would not be involved in the sign business at all. We are going to form a separate corporation that would be the property/rental only with the 4 of us. She is employed elsewhere and her husband owns his own business which will relocate to this property after his current lease is up. We are going to have papers drawn up for the 'new' business that will hold the property. We are meeting this weekend to go over more details and to draw up a rough outline for the lawyer to look at make further recommendations. We are not buying it just so someone else won't, although that thought has been in the back of my mind during this process. The owner approached us years ago about purchasing it and we didn't feel comfortable doing at that time for a number of reasons. We've been kicking ourselves since then and have often discussed how much we wish we owned the place and what we'd do with it if it was ours. Now it's coming to fruition and change scares me to be honest! Thanks for all the opinions, points to ponder and good wishes. As always, the peas give me more to think about! |
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Post by tripletmom on Jun 18, 2015 20:55:20 GMT
Best of luck to you! Congrats on taking the leap.
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Post by papersilly on Jun 18, 2015 21:03:06 GMT
when I was a kid, my mom and dad bought commercial property with two small buildings on it. it was on a main street in town and had great frontage. my dad used one building and rented out the other one. he was able to pay it off in half the time and has never taken out another loan on the building. the great thing about owning your own building is that it is yours. no landlords to deal with, you can improve the property as you wish. a great thing about having a paid off building is that as business goes up and down (as it often does), you don't have to worry about loan payments or foreclosure if times are lean. if you can make the payments, I never see a downside to owning real estate. I do have hesitations about partnering up with people on the buy. when times are good, things are fine, but when times are bad, business relationships can get strained. it's almost as bad as having a landlord. just as long as you have a plan for such times, (buy out clause or majority ownership), you should be okay. good luck and congrats!!
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Post by eebud on Jun 18, 2015 21:07:17 GMT
I'm glad to see you are doing this. Have you talked about the who will file the taxes for the corporation? LLC I assume? I manage an LLC for some family members. We have to file a 1065 every year and each partner receives a K-1 that they have to file on their personal taxes. I don't know for sure that this is what you will be doing but if it is, please know that the IRS has gotten VERY strict on getting the 1065 filed on time. They have HUGE penalties per member for every month it is late.
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Post by penny on Jun 18, 2015 21:07:26 GMT
You will be fine  You've handled the unexpected - and succeeded, in your 15 years in business... You're bringing those abilities with you... You'll be able to handle what this new venture brings |
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Post by crazy4scraps on Jun 19, 2015 2:12:28 GMT
What does your accountant say? That's really the person you should be asking because he/she knows your financials and what you can actually afford to do over the long run.
That said, when we bought the commercial building for my business years ago, it was one of the best decisions we made. We bought when the market was low, my business paid the mortgage on it while I was in there, it allowed me to get out of retail when I wanted to because I wasn't locked into a lease, and we sold it when the market was up.
The only thing I would question would be the partnership aspect of the deal. If you can at all do it on your own, that's how I would do it. No matter who the partners are, it almost never works out and they are always expensive to extract yourself from when they go south. I've known many businesses that started out with partners and of all of them only one was truly successful. All the rest went sideways for all kinds of reasons. Make sure EVERYTHING is spelled out legally down to the dead last detail. Spending a few thousand on legal fees up front sure beats spending many thousands of dollars on legal fees to get out of a partnership down the road. Don't ask me how I know this...
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tincin
Drama Llama
Posts: 5,368
Jul 25, 2014 4:55:32 GMT
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Post by tincin on Jun 19, 2015 5:05:56 GMT
Sounds like you are getting good advice, good luck.
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You've handled the unexpected - and succeeded, in your 15 years in business... You're bringing those abilities with you... You'll be able to handle what this new venture brings 
