hello out there!

I was told that in order determine the financial status on income producing property (retail property), a copy of lease is required from each tenant and get all the expenses from the landlord.

now, is there anything else i need from the tenant besides copy of the lease? and what do i need to ask from the landlord to determine his expenses?

What kind of retail property IS IT???

The TENANT MIX is very important for the retail property.There is more value with anchors locked into long term leases as that will help fill space from other tenants who want the traffic off the anchor.

If the leases are signed under value for a long period of time that can be a deterrant for the buyer.The reason is even with improvements they will not be able to raise the rent for some time to increase there cashflow and value position.

The reality is to take financials from the owner but to conduct your own numbers. Often times the owner is hiding funds,has hidden costs they are not disclosing,or keep poor records.

hey, super realto. thanks for responding.
it is a strip center. it has no anchor tenant.

Old small strip centers that are at or right next to major arterial crossways will stay full for the most part.Old strip centers down a ways from the cross section will suffer higher vacancies in a down market.

If you purchase those factor in high vacancy and reduced rent when purchasing or you could overpay.

The key to what Super is saying - "For a long period". If they are below market, there could be some advantages here too- if the property can be had at the right price to make below market numbers work and there are real opportunities to increase the cash flow over time, then you have some insulation against tenants leaving for other, less expensive spaces. Being $1/SF below market and keeping your 5,000 SF tenant in place is better than losing the tenant altogether- especially if they're an anchor. If they are below market and you can buy at those prices, and then increase the income over 1-2 years to be closer to market, then your ROI can be increased.

Any savvy owner/investor will have a rent roll (or the property manager will). While it is always good to double check the info on the leases, the rent roll is a summary form that is often requested by potential purchasers. It consists of each unit and the current terms and tenant information for all. It includes lease expirations, options, and anything out of the ordinary like the ability to break the lease after x years. If it is anything other than a NNN lease, then the expense sheet is crucial and it should be included with the rent roll. If a property manager is used, they should have a summary all the expenses for you, including their "management fee".

Great responses. I'd add the following: in Canada we often use estoppel certificates to get an understanding from each tenant of exactly what they think they're liable for and how much they pay. It also allows them to disclose any issues that they may have had in the past with their current landlord. This along with the aforementioned rent roll, and income and expense information from the owner/property manager will go a long way in reducing your risk.
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unless they're buying with all cash, they will need a loan to purchase your property.
Their lender will almost certainly require current and historical rent rolls and expense statements. The appraiser will confirm lease rates and estoppels, which will also be a clause in any new commercial loan.
Most lenders now are asking to see copies of the leases as well, so it's good to have them on hand before you start the process.

Without those items its pretty hard to properly value the property anyway.

Good luck,

Craig Grella
Connect Realty
206-274-8336
craiggrella@connectrealty.com