Blake and Speaker A revise a Letter of Intent for a car wash property, lowering the offer from $3.7M to $2.1M with business broker Dr. Fernando Acosta. They extend due diligence to 90 days, add a clause verifying the lease will transfer, and question the seller's 12% cap rate, calculating the true rate at 7.2% based on $150k NOI.
What we wanna do is get Dr. Fernando Acosta involved. He's a business broker and he can reach out to him and say, listen, this is where this needs to be. This is what we're willing to offer. And we can actually get Dr. Acosta involved. So I think that's our next move is to set up the appointment to call and talk to him. Okay. You said you had another conversation with the guy. Did he, did he respond back or was that with your own AI that you had that conversation?
No, I'm just chatting with the AI right now, updating another LOI with the 2.1 cap.
Offer. Got it. Okay. That's good. Anyway, Blake, you got, you got this LOI. I'm going to share your screen. We'll take a look at it and then we'll deep dive on how to get ahold of Dr. Costa. Okay. That's with M&M going down. Okay. So we went 2.1 and it's based on the underwriting showing that, okay, you want a 90-day due diligence, not a 30. Okay. I like all that. As far as buyer proposal closing, we made that 30 and then You got to put in there, it's contingent on the lease verification of the lease with the car wash people, because we're not buying the car wash business, we're buying the property it's sitting on.
Correct.
Okay. So put that in there that we're going to need that.
Which section should I put that in?
It's going to be a separate section. So I would, I would take this back in the Deal Hunter and say, okay, we need to add in there that all leases, all income possibilities, everything has to stay in place and transfer. Got it. Remake the LOI. Everything there looks great, but what's missing is that the lease for the car wash and the owner for the car wash needs to have valid leases and they have to be in place with no risk of losing the lease. And we need that verification and documentation prior to signing a PSA. And then did you go ahead and send that? The, did you do the math on it to see like where he was at as far as cap rate and all that? With the updated price, it said 12%, but let's see what the math actually worked out to, right? But go back down right there. All right. So boom, boom. All right. So we don't want to tell them that the cap rate's 12.1%. We don't believe their NOI. That's what we're having an issue with.
Okay. Because essentially if we lowered the cash offer by almost from 3.7 to 2.1, that increases the cap rate.
Keep going down. Let's look at the DSCR score, right? Because right here on DSCR, well, the annual debt service wouldn't be zero. It'd be based on 2.1. Let's say we're borrowing the full 2.1 and would— what is our DSCR score on that?
Okay.
Keep going down. So risk adjustment is a 12% required yield. We can go do a little research on what the yield should be on a, on a car wash. So, but we believe they're more around $150,000, which is why we think it's a 7.2 cap.
Okay.
See the difference now?
I do.
