I priced the seller's own lease like it was arm's length. It wasn't.

Three weeks before listing is the detail that would've stopped me cold. That's not a lease, that's a pricing instrument he built for the sale.

I've seen the small version of this on residential. Bought a fourplex where the seller's daughter was in unit 3 at $1,400 when the other three were $900, and I caught it because the security deposit ledger had no entry for her. Deposits are a decent tell, related party tenants almost never post one. Would that have flagged it earlier for you or did the file not go that deep?

Dumb question I'd have been too embarrassed to ask in person. If the seller had actually signed the personal guarantee, would the deal have worked at $690k? Or is a personal guarantee from one guy who runs a parts store in a town of 4,200 worth basically nothing to a commercial buyer anyway?

@compass it's worth something but not $21k a year of income something. Buyer would still discount it, because collecting on a personal guarantee means suing a local guy in his own county and then finding assets. What it mainly buys you is the seller having skin in the outcome, which is why the refusal was so informative here.

I've gone over this a couple of times. So the income was real, he was actually paying $9/sf, but a buyer values it at $4 to $5 because that's what the next tenant would pay if he leaves? I think I understand why, I just want to make sure I'm not missing something.

@juniper that's how I read it too. The rent is real today and worthless the day he walks, and he controls both sides of that.

Same family of mistake as mine last month, I priced someone's opinion of income instead of the income. The tertiary market part scares me more than the related party part honestly. A 10.5 cap and only two buyers in the whole state who'd look, that's a thin runway even if the rent roll had been clean.

The refusal to guarantee is the whole post. I've been on the other side of that, a landlord asked me to guarantee my shop's lease personally when I sold my building and I said no, because I knew I wanted the option to move the business in three years. Sellers who do this aren't usually being sneaky, they just want the number and the flexibility at once. Ask them straight: are you willing to guarantee this for the full term. You get an honest answer surprisingly often.

Would a note structure have saved it? Seller carries $300k behind a $390k price, so he gets closer to his number over time and the buyer's risk on the lease is offset by the paper. I'm still learning this stuff so I might be describing something nobody actually does.

@vellum people do that, but it doesn't help a wholesaler much. Your fee comes out of the spread at closing, and if the price drops to $390k the spread you were counting on is gone whether or not the seller finances part of it. The structure fixes the seller's problem, not @hollow's.

Getting half the earnest back after arguing is a better outcome than most. Did your contract have a specific out you used, or did the seller just take the deal to make you go away?