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Hello Real Estate Professionals - I have a situation I would LOVE your input on:
I own 2 commercial approximately one acre parcels in a very desirable city.
The two parcels combined look like a T.
The front parcel abuts the street and has a building on it.
The back parcel (the top of the T), has two tenants, one on either side.
The parcel behind the back parcel is owned by a storage company and strangely, they have access to their pump, which sits on the front parcel. They have to access it per a 20' utility easement - via the street that abuts the front parcel (as opposed to just coming across the back parcel).
So: I have three tenants - two in the back and one in the front.
The rental income is very desirable.
I would like to subdivide the back parcel, but my Realtor has told me the City says I can't because of the Flag Lot . . . don't know if this is true.
I think subdividing could be a hassle - not sure - haven't checked it out. My Realtor is not that interested in this issue - I do have loyalty to him, though.
I am wondering if it might be possible to realize some major income if I did a long-term lease - but I know nothing about that subject - is rent paid in advance for many years, or not, is my first question and then how desirable (or marketable) is such to prospective tenants?
The back parcel is undeveloped - so just raw land - the two tenants are basically just storing stuff from other locations - there can be no trailers, etc.
I want to realize income from half of the back parcel so I can buy something else!
your Realtor would know the answer far better than the anonymous internet.
we don't have any idea where you are.
we don't know what the zoning/development rules are there.
About the only question we can answer is that a typical "99 year ground lease" - they make you payments over the life of the lease, not in an upfront sum. Unless you want to discount the total for TVM (time value of money).
I was laying out the particulars, in case anyone had ideas I had not considered.
I really want to know about the prospect of a long term lease - if they pay as they go, what would be the advantage to me, the lessor? It doesn't seem obvious. I want to subdivide the back parcel, but I am told that it isn't possible because it's a flag lot (which I don't believe, but I haven't researched myself).
What more can anyone tell me about long term leases?
in my location - Raleigh NC - they limited the ability to create/develop residential flag lots (and probably commercial too) by requiring a certain feet of road frontage. Sounds like that may apply to your locale as well.
"laying out the particulars" = telling us what your location is, at least.
Quote:
The parcel behind the back parcel is owned by a storage company and strangely, they have access to their pump, which sits on the front parcel. They have to access it per a 20' utility easement - via the street that abuts the front parcel (as opposed to just coming across the back parcel).
i don't know what this means.
As for subdividing, that's a lawyer/zoning department issue, not something that Realtors handle. He can maybe put you in touch with the right person.
Yes. I did go online to the planning department website and read newer rules for flag lots - but they seem to relate to residential, not commercial lots. I don't understand the issue with discriminating against flag lots - that irritates me!
In that paragraph about the storage company, I was just noting that their parcel abuts the parcel I want to sub-divide (or do a lot line adjustment to if they wanted to purchase it) but that they actually own a utility easement on the front parcel (which could also be adjusted into the second parcel in a purchase).
It does sound complicated, but it's not really (except for the red tape in doing anything).
I don't want to spend thousands of dollars getting surveys, etc. (you don't have to do that for a lot line adjustment).
I know some Realtors know about this stuff - that's why I was asking.
Maybe it would be more commercial Realtors who would know about long term leases. Of course I didn't expect you to know City rules, etc. - was curious about why it would be advantageous for a lessor to do a long term lease.
yes, commercial agents will know far more about commercial properties than residential agents.
The commercial questions and agents here are few and far between.
If there are no restrictions on commercial flag lots, yet your agent is asserting that tehre are, well....that goes to another topic here about practicing in an area which doesn't match your expertise.
I am NOT a commercial agent. Anecdotally, a "ground lease" aka 99-year lease means the tenant is going to build some improvements on your property and they retain ownership of the improvements. Thinking is, after 99 years everything has changed and the building/improvements would need to be replaced anyway.
As to the storage company, it sounds like what you're conveying is that they have an easement that involves both your back parcel and your front parcel. Does it cut right across the top of the T; does it run along one side of your deep front parcel?
The top of the T is the parcel I want to sub-divide (in two) or do a lot line adjustment with the storage company who owns the parcel behind the top of the T.
Their utility easement is on the long part of the T (on the front parcel) and it does not extend to back parcel (the top of the T). It is a 20' easement along the far side of the long part of the T - and their utility sits on that long side right before the top of the T.
That is a little complication. They are supposed to access their utility through the front parcel (the one that abuts the road) but I let them cut through the back parcel (which does not have any easement on it).
This is driving me crazy because I don't know how to proceed.
Right now I am trying to contact the storage company acquisitions department, which is not easy (no published contact info).
My broker is not really interested in helping me (as he went to the City and was told I couldn't sub-divide - but I don't think he looked into a lot line adjustment) . . .
Thanks for the info on the long term lease - I still do not understand how it benefits the lessor, but I will try to look elsewhere for info - maybe there's a book on this.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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The flag lot is going to be your issue. Now that the local agency has weighed in, you might grant an easement to the back lot that has the storage business.
Unfortunately, even in CA, it might be time to engage an attorney.
In that paragraph about the storage company, I was just noting that their parcel abuts the parcel I want to sub-divide (or do a lot line adjustment to if they wanted to purchase it) but that they actually own a utility easement on the front parcel (which could also be adjusted into the second parcel in a purchase).
If you're looking to sell to the storage company, I don't see why you're concerned about flag lot restrictions. It's likely that they could just amend their property description to include the part you'd be selling to them...and you could likely add any remainder to your other parcel (if it can't stand alone). Some things may not be allowed per ordinance, but there is a variance process to accommodate certain situations if they make sense.
As to a 50-99 year lease, I really don't see how that would benefit you. It just seems like it would make everything more complicated for an individual. Corporations are more prone to do such long-term leases but, for the life of me (which isn't going to be another 50 years!), I fail to see how such a lease would be beneficial. Property encumbered with such a long-term lease would also be more difficult to sell since it would greatly reduce the potential pool of purchasers.
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