4
3
Month-To-Month Leases
The lender wants to see a contractual stream of income that exceeds the mortgage payments that will be due, which makes sense. So how do they view a month-to-month tenant? Do they recognise income even though the tenant could be out the month after the deal closes?
Every lender treats month-to-month tenants differently, a creative selling agent can typically use this as a positive when selling your property. They may not recognise the income at all, which could mean no loan for the buyer and no sale for you.
There are a few exceptions. For example, if the month-to-month tenant is paying a below-market rent (Represented as passing income where a property or multiple tenancies may be vacant) , you should always try to lock them into a longer-term lease. But if you expect the buyer to want to keep the tenant, then get the tenant signed up to ideally on a minimum three (3) year head term lease.
Overpricing The Property
Establishing the ideal asking price for a commercial property is not a simple process. Every property is unique. Every market and submarket has different buyer demand. And that demand is not spread evenly across property types.
When we set an asking price, we price the property as aggressively as we can without turning off buyers. We want buyers to contact us with questions and to request more information. If you price the property so high that buyers are reluctant to even start that conversation, then you lose.
Be honest about the demand the property will receive in the marketplace. Then price the property about 10% higher than the sale price range you expect in line with what the local market is marketing similar offerings.