Bought my first retail unit and the estoppel almost ended it
This closed six weeks ago and I've been waiting to write it up until the first rent hit the account, which it did on the second.
What it is: a 2,100 sf condominium retail unit inside an eight-unit neighborhood center. A retail condo means the unit is separately deeded, like an apartment condo, and there's an association that owns the parking, the lot, and the roof, and bills each unit a share. So I own the box and a slice of the common area obligations. I did not know this was a thing until March.
The numbers, all of them:
- Price $390,000
- Rent $34,020 a year, so $16.20/sf, tenant is a hair and nail studio, seven years in that suite, four years left plus one three-year option
- Association dues $4,320 a year, which the lease passes through to the tenant
- Taxes and insurance also passed through
- My non-recoverable costs: bookkeeping, my own liability policy, and a reserve I set at $2,400 a year
- Local bank, 25% down, 20-year amortization, five-year term. I confirmed the rate and terms in writing before I removed my financing contingency, which everyone here told me to do
The part that nearly broke it: the estoppel certificate. That's the form the tenant signs confirming what the lease actually says and whether anything else was agreed. Mine came back saying the tenant had been told verbally by the seller that the landlord would resurface the parking lot this year. There was also a pending association special assessment of $18,400 total for the lot, my share $2,300, that the seller had not disclosed in the first document set. The tenant's belief and the assessment were the same project.
I asked for a $6,000 credit at closing, which covered my assessment share and two months of cushion, and a written acknowledgment from the tenant that the lot work goes through the association and not through me. Got both. It took eleven days and I was ready to walk.
What I'd keep: reading the estoppel before the appraisal, not after. And asking the association for two years of minutes, which is where I found the assessment discussion in the first place.