3 ms·

Indeed, it’s even common to negotiate for some months of discounted (or zero) rent, as long as you don’t change the official rent!

by wrs 3y ago

blackeyeblitzar 3y ago
Isn’t this deceptive? If a buyer thinks they’re getting a priority with one kind of rent potential but the truth is that there’s a lot of these negotiations that distort things, couldn’t they be fraudulent? Also how does property tax get affected by all this?
- lotsofpulp 3y ago
  Free rent doesn’t fool a lender or commercial property buyer. It’s elementary to take annual income and divide by 12 to get actual monthly rents. Appraisals for property tax are similarly unaffected. “Free” months are to prevent advertised rents from being lower to prospective and current tenants. It helps set a higher price anchor so that future negotiations are based off of that.
  - bruce511 3y ago
    It's also an important offset against the cost of moving. Obviously norms in different places will vary. We have not moved a lot as a business, but when we have it's been -expensive-. Leaving aside the cost of actual movers (reasonably low) it costs money to prepare a new office for us. Granted, we place a premium on employee comfort, so we spend a bit on kitchens etc, but also networking, furniture, the offices themselves and so on. Then there's down-time for the move itself (packing, moving, unpacking.) And "rent overlap". Once construction starts we're effectively renting 2 offices, the old one and the new one. In cases where serious work was done this can span 2 to 3 months. So we've always negotiated "rent free" starter months. This mitigates (some of) the extra expenses incurred. In some cases this translates as discounts for the first year or whatever.
    - wrs 3y ago
      Speaking of construction, another thing that might be surprising is the “tenant improvement allowance”. If your lease is long enough (at least 5-7 years), it’s often expected that the landlord will pay to hire an architect, rip out whatever interior the previous tenant had, and build out the interior to your specs. (Up to some limit, which is the “allowance”). But again, that isn’t counted as a rent discount. In the other direction, there’s the whole area of “net” rent (and “triple-net” rent), and the bizarre calculation for shared spaces that makes “square foot” a semi-imaginary unit.
- CydeWeys 3y ago
  You have to look at the actual income statements to see how much they're actually being paid in a year, and look at the signed leases to see how much the building will actually make in future years. It's all part of due diligence for buying a high value commercial property.
pfannkuchen 3y ago
I thought that was about rent control?
- deleted 3y ago
  [deleted]

Indeed, it’s even common to negotiate for some months of discounted (or zero) rent, as long as you don’t change the official rent!

by wrs 3y ago

Indeed, it’s even common to negotiate for some months of discounted (or zero) rent, as long as you don’t change the official rent!

blackeyeblitzar 3y ago

Isn’t this deceptive? If a buyer thinks they’re getting a priority with one kind of rent potential but the truth is that there’s a lot of these negotiations that distort things, couldn’t they be fraudulent? Also how does property tax get affected by all this?

lotsofpulp 3y ago
Free rent doesn’t fool a lender or commercial property buyer. It’s elementary to take annual income and divide by 12 to get actual monthly rents. Appraisals for property tax are similarly unaffected. “Free” months are to prevent advertised rents from being lower to prospective and current tenants. It helps set a higher price anchor so that future negotiations are based off of that.
- bruce511 3y ago
  It's also an important offset against the cost of moving. Obviously norms in different places will vary. We have not moved a lot as a business, but when we have it's been -expensive-. Leaving aside the cost of actual movers (reasonably low) it costs money to prepare a new office for us. Granted, we place a premium on employee comfort, so we spend a bit on kitchens etc, but also networking, furniture, the offices themselves and so on. Then there's down-time for the move itself (packing, moving, unpacking.) And "rent overlap". Once construction starts we're effectively renting 2 offices, the old one and the new one. In cases where serious work was done this can span 2 to 3 months. So we've always negotiated "rent free" starter months. This mitigates (some of) the extra expenses incurred. In some cases this translates as discounts for the first year or whatever.
  - wrs 3y ago
    Speaking of construction, another thing that might be surprising is the “tenant improvement allowance”. If your lease is long enough (at least 5-7 years), it’s often expected that the landlord will pay to hire an architect, rip out whatever interior the previous tenant had, and build out the interior to your specs. (Up to some limit, which is the “allowance”). But again, that isn’t counted as a rent discount. In the other direction, there’s the whole area of “net” rent (and “triple-net” rent), and the bizarre calculation for shared spaces that makes “square foot” a semi-imaginary unit.
CydeWeys 3y ago
You have to look at the actual income statements to see how much they're actually being paid in a year, and look at the signed leases to see how much the building will actually make in future years. It's all part of due diligence for buying a high value commercial property.

pfannkuchen 3y ago

I thought that was about rent control?

deleted 3y ago
[deleted]