To buy or not to buy ?

[scianci]

Well I think this is a tuff one, but I am going to thow it out there. My issue is as follows, I currently own a Laundromat wich is in a free standing 2500sq ft building, I am paying $3500 per month on a 20 yr lease, not quite 2 yrs into it. Originally the owner of the property was the owner of the laundromat, I purchased the laundromat with an option to buy in 5 years at a prices of $435,000 for the property, which at the time I really was not to concerned about the price. Recently I called the land lord and said I would rather not throw away the $3500 per month in lease, and would like to buy the building now. He has agreed to sell but he wants the $435,000 he stated in the 5 year buy out. The problem is I went to a local realtor to get a market analysis and they did a comparison of other like building, and did not know what I am paying in the lease, and came back with a value of $199,000 to $220,000. I have yet to tell the land lord what I have found out from the realtor.
His take on this is he is getting $3500 per month for this propery times 12 is $42,000 per year therefore the value of the building is as follows. What ever the lease brings in should be 10% of what the building is worth, which in this case would be $420,000 which is not that far off of his calculations.
My major issue is what the local realtor evaluation was, and oh yeah I forgot to mention the fact that he can only do this before 1/15/04 due to he is doing a transfer of income from one property to another to avoid the capital gain.
Like I said before I have not told him my results of the realtor, but in my experience with dealing with him in the past is he is very independent and probably will not budge to much, which bring to the issue if I should keep paying him the $3500 per month or start paying myself the $3500 per month and the monies going into a 15 year morgage payment of about $3200 if I mortgage the whole $435,000, or do I flat out refused to buy the building at that price and loose the oppertunity of the depreciation and tax wright off etc. But then I am buying a building at a very high premium and my not recoop the price if I want to sell in the future.

Does Anyone out there have an answer to this confusing issue, or know a realestate person who might be familar with this kind of thing. scianci2@optonline.net

[Howard]

There is no confusion of this issue, it is very simple. He wants his price, which has nothing to do with market value. You need to decide if it is worth it to you to pay double the market value. From what you say I don't think he will care what someone else says it is worth. He figures that it is worth $435K to him and will sell for that price. You could try talking to him but I bet you don't get very far.

That was simple.

[RWSmith]

Appraisers generally look at three things when evaluating commercial property. Comparable sales, replacement value, and income. I would have a professional appraiser evaluate the property and if you like the results show it to the landlord.
It might give you some leverage. Who knows the landlord might need the money now.
PS The realtor might have forgotten to add in the leasehold improvements to his comparable sales value.
Good-Luck