Building lease options/possibilities

[Mat wannabe]

Hi.

I hope to open a small-ish coin laundromat, in order to learn the business.
I've spent some time reading the forums here, and doing other research.

For my first, I want to lease an existing building.
What are the possibilities for lease options?
How do I negotiate a deal so that after the first year or two years if I'm clearly profitable, to avoid an unworkable rent increase?

Can anyone offer guidance?
Thanks in advance!

[Adamski]

Wannabe,

Simply don't tie the rental rate to your gross sales. Your lease should specify a fixed rate for the first 10 years.

[Xiong]

it's better to own the building then to lease it

perhaps as one owners once told me, "if you're leasing, then soon the building owner will get you by the balls"

[Howard]

Originally Posted by Xiong

it's better to own the building then to lease it

perhaps as one owners once told me, "if you're leasing, then soon the building owner will get you by the balls"

While it could be true, it is a very stupid blanket statement to make. Many times leasing is a much better option. Had you bought a property in Late 2007 you will be licking your wounds for many years to come. What if the area "changes" and goes down hill? What if you don't want to tie up money in a property? An actively managed business will generate a higher return than property, thus you could probably buy four or five mats in leased quarters rather than one with property. Bottom line, there is no one right answer to this.

[Xiong]

Originally Posted by Howard

While it could be true, it is a very stupid blanket statement to make. Many times leasing is a much better option. Had you bought a property in Late 2007 you will be licking your wounds for many years to come. What if the area "changes" and goes down hill? What if you don't want to tie up money in a property? An actively managed business will generate a higher return than property, thus you could probably buy four or five mats in leased quarters rather than one with property. Bottom line, there is no one right answer to this.

that's true, everyone has different objectives.

not too long ago, i read that mcdonalds is not really in the business of food but rather in the business of real estate

with regard to his topic, it seems that my situation is leading to what that mat owner said to me. i got another 5 years to go on my old lease, i'm planning to remodel the shop. i want to completely change everything, and it's going to cost me lots of money. i asked the landlord that can we do a new lease so i get 15 years, it's been taking him almost a year now to decide whether to give me a new lease. my next door neighbor did the same to his restaurant, he got a new lease for more years at about 25% more rent plus market review every year with a consistent 5% increase every year; with him is that he remodel first, then ask the landlord afterward to get the new lease. he said to me that he should have done the reverse, so if the terms are not favorable to him he could move, but that's too late now that all his new equipment are in place. seeing what happened to him, i'm very likely will be in the same boat if i remodel first and ask for a new lease afterward. the landlord has said he would gave me a new lease after i've done my remodelling, and that i shouldn't worry about not getting a new lease....sounds too fishy

so now i'm putting this mat remodelling on hold until i heard from mr landlord, as well as i'm hunting for properties that could be my own or at favorable terms to me.

every situation may be different, thought i would prefer to not experience the pain myself but rather to see from others.

my original bplan was to lease only...but now thinking about this mat program and my investigation with many mat owners....maybe owning is better if i'm going to be in for the long term. last week conversation with my repairman, he said his biggest mistake in the mat business was not to own the building that his mat is in and he's been there for 17 years renting.

[Adamski]

Originally Posted by Xiong

... I got another 5 years to go on my old lease, i'm planning to remodel the shop. i want to completely change everything, and it's going to cost me lots of money. i asked the landlord that can we do a new lease so i get 15 years, it's been taking him almost a year now to decide whether to give me a new lease. my next door neighbor did the same to his restaurant, he got a new lease for more years at about 25% more rent plus market review every year with a consistent 5% increase every year; with him is that he remodel first, then ask the landlord afterward to get the new lease. he said to me that he should have done the reverse, so if the terms are not favorable to him he could move, but that's too late now that all his new equipment are in place. seeing what happened to him, i'm very likely will be in the same boat if i remodel first and ask for a new lease afterward. the landlord has said he would gave me a new lease after i've done my remodelling, and that i shouldn't worry about not getting a new lease....sounds too fishy ...

Xiong,

Sure Mr Landlord will give you a new lease but at what cost? If you rehab first and then he quotes a very high rental rate, what are you going to do? Are you going to move everything to a new location and lose a large portion of your rehab project? Your landlord is betting that you won't move. He's betting that you'll agree to pay his inflated rate and stay where you are. He's manipulating the negotiation process to ensure a favorable outcome for himself.

In most cases, the laundromat owner is better off owning his building rather than renting. If you're your own landlord, you have nobody to negotiate with and that simplifies all property management issues. In addition, you have more flexibility when deciding what will go into your building and what services you will provide. However, few laundromat buyers can afford to buy the building at the same time.

[Howard]

Originally Posted by Xiong

..not too long ago, i read that mcdonalds is not really in the business of food but rather in the business of real estate

.

I think you have confused Mcdonalds with Sears/K-Mart. At least in the US almost all Mcdonalds are franchise stores.