What format is a potential landlord looking for when they request a personal financial statement?

I am in talks to purchase a business contingent on being able to renegotiate the current retail lease without having to put up my home as collateral. The landlord is requesting a personal financial statement. How do I prepare this? How will an underwater home mortgage affect my ability to negotiate if I have good credit and stable income from another business (as verified by tax returns)?
In Leasing Property - Asked by Iesha H. - Sep 17, 2012
Report Abuse
Answer this Question

Answer(s)

Randal C.
Broker/Agent
El Paso, TX

Typically you need to show you have the financial where with all to deliver. Show you can do it. Show you have enough income as to minimize the landlords risk. That said, unless the landlord has a dire situation, they will not likely wish to accept less than the current rates. I personally dont care about an underwater house as 1/2 the country is in that same situation. I just want to know I can count on that monthly rent....So send some bank statements and tax records....Talk to him/her. Share your vision...Good luck. (I own 97 commercial units)

Sep 19, 2012
Report Abuse
Anthony C.
Santa Barbara, CA

Lesha, your prospective landlord would answer this question by tellling you that they would like a complete set of financial statements prepared by a CPA. If that makes sense for your situation, do it that way.
If you have to prepare your own, do it on a spread sheet program. They would probably like to see that you have been in the business (same type you are looking into purchasing) for a long time. Also, they would like to see that you have been successful in that line of work.
It would help you to know who will be looking at the info you provide. Will it be the owner of the property or a property manager? You should try to imagine what you would do if you were in that position and provide the requisite amount of info in a clear, concise and honest manner.
The underwater-on-the-primary-residence thing is probably not as important as whether you will be able to make your new business successful and be able to pay the rent for the business space.
Anthony Cangelosi CPA
TEDESCO Appraisal & Valuation
Santa Barbara, CA

Sep 20, 2012
Report Abuse
Rob B.
Chandler, AZ

Lesha...Financial presentation is very important to a landlord. They often will choose to keep a space vacant, rather than renting to a tenant that may default. Particularly if they will have any costs in the transaction. If the landlord has a current business in the space that has been faithful to his or her lease; and that tenant still has time remaining on the current lease, it is likely the landlord will be doubly interested in your financial strength, as well as your ability to run a successful business.
If the current tenant's lease is up or soon to be up, the landlord will likely be a little less demanding, as his or her option then becomes keep the space full or have a need to find a new tenant for vacant space, along with the cost of down time, tenant improvements, rental concessions, and commissions. However, the landlord will still want to see that you are capable, particularly if he or she will not have a strong personal guarantee.
Thus, long explanation made shorter, put your very best presentation together on why you will be a good risk. If possible, you may have to offer to provide him with a strong security deposit if possible to show your willingness to help him overcome his need for a personal guarantee. If you do put up a double or triple security deposit, make a part of it refundable after say 12 or 24 months, assuming you have a long-term lease.
With your good credit, and stable income from another business this should help make your case as well.
Onward and Upward....
Rob Baird
rob@capratecommercial.com

Sep 28, 2012
Report Abuse
Rob B.
Chandler, AZ

Lesha...
In the previous answer the web site I referenced was not correct. Please see the correct website referenced here.
Onward and Upward!
Rob Baird

Sep 28, 2012
Report Abuse
Chris S.
Broker/Agent
Coeur D'alene, ID

We ask for the same data on retail leasing ... My advice, keep it simple and be honest. What the landlord really wants to know is that if you assume the existing lease you will be at least as stable as the current signatory on the lease.

Oct 9, 2012
Report Abuse
Robert H.
Broker/Agent
Metairie, LA

ask the landlord. some want a tax return, some want an income statement and balance sheet. be clear on what they want before you supply it or else you'll be supplying info all day long. also have some understanding of what they are looking for in the data. financial ratios? a certain cash flow over debt level?

Oct 13, 2012
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question