Needed: Wealthy Capitalist

[LongLiveYorke 38]

Eat a dick.

By "hundo," I meant $100, by the way.

[ShakeZuma 585]

Life lesson: segregate your capital into 'liquidity modes' so you can buy into pricing inefficiencies without having to liquidate the same at a likewise inefficient price).

yes, yes.

[tobytobey 0]

Assuming the highest and best use of the property is to tear down the existing improvements for redevelopment, the big question is who is going to buy the site.If Walgreen's is out of the picture, your most likely users are going to be either a CVS or Rite Aid. If either or both have stores nearby, they are most likely not going to relocate (outside one of them moving from an inline strip center location to a freestanding store).Outisde of drug store chains, i'm not sure who you're going to find to spend that kind of money for land in this economy.Good luck.

[akoff 0]

OK, more details:The land is currently a restaurant. About a year ago, Walgreen's signed a purchase agreement for $1.3M for the property. They even got the city to rezone an adjoining lot so they could build a Walgreen's on it. Then the Walgreen's-Snyder's merger happened, and they put an end to all expansion plans, and the deal fell through.The restaurant owners are going broke, and will be foreclosed on in February. They owe $450K. If nobody offers a higher amount, which is a distinct possibility in this real estate market, then it can be had for that amount. I am in a unique position that, if it gets to a bidding war, I can bid up to $580K and still only have it cost $450K (due to a claim I have on the land).Since the land is currently for sale, a lot of things could happen. First, it could be sold before then. Second, some "business people" are trying to work out a deal to manage and own the restaurant and keep the place. And third, someone could swoop in and buy it while the foreclosure clears.Land has not dropped that much here over the last year, so if it was 1.3M a year ago, it's worth at least 900K now, probably over a million.The problem is waiting for it to re-sell. But the restaurant owner told me he has over $8K/month cash flow toward the mortgage now, so it seems like even $6K of that would be enough to service the loan and still make a profit until it sells, and allow the restaurant to continue make enough profit to keep them around.I gave a banker the preliminary numbers, and he said it doesn't sound good, but didn't say why. I'm hoping to meet with him this week. Any ideas why this wouldn't work for a bank? Am I missing something big?

my guess would be banks are not big fans of the restaurant business in general. it is a fickle industry with lots of perishables and cash...banks are not big fans of either. you also are looking for a loan that in the banks eyes will be realestate investment. they are looking for a min of 20% down. the bank itself doesn't care if you have a tenet or not, if you aren't the owner of the business on the property it can't be considered owner occupied. banks want you the owner to have skin in the game, even if you are stealing the property if you have to put up the cash. certainly not an expert opinion here just some of what i have found in my investment / realestate travels.I bought a 24 acre property this summer out of a short sale. I bought the property for 38 cents on the dollar based on the lending banks appraisal...and they still wanted 20 percent down. Think about that my lender who hired the appraiser to value the property, so you know he is erring to caution, was making a loan with 62 percent equity and still wanted 20 percent...all because i wasn't going to occupy the property.

[hblask 1]

To bad you aren't liquid and too bad you don't know what NNN Leases are, save for what you're about to go google right now and perhaps, return to this thread and pretend you knew all along. If you had money and had that knowledge, you'd see a significant opportunity here for a man with the right Rainmaking skills.

Yeah, I had to look up "NNN leases", but I'd have a lawyer draw up any necessary contracts anyway. The problem is the liquidity, of course. If I cashed out my 401K, I might be close, but then I'd have to sell it before the next tax season.

[hblask 1]

Assuming the highest and best use of the property is to tear down the existing improvements for redevelopment, the big question is who is going to buy the site.

I'm not sure that's the best use. The restaurant that is there is an institution, it's been there forever. Also, the building could just be converted into office space. It's one of those main drags where lots of old buildings are converted into space for lawyers, dentists, and realtors.

[El Guapo 8]

Yeah, I had to look up "NNN leases", but I'd have a lawyer draw up any necessary contracts anyway. The problem is the liquidity, of course. If I cashed out my 401K, I might be close, but then I'd have to sell it before the next tax season.

Oh god, you would pay 35% federal, whatever state and a 10% early withdrawal penalty.

[tobytobey 0]

I'm not sure that's the best use. The restaurant that is there is an institution, it's been there forever. Also, the building could just be converted into office space. It's one of those main drags where lots of old buildings are converted into space for lawyers, dentists, and realtors.

If you're thinking of acquiring the property with the intention of keeping the existing improvements, I would not give much weight to the previous contract. Walgreen's was essentially acting as a user in need of a site and willing to pay a high end of the range (if not above) market price for a "specific" site.A few other things you might want to consider. If you purchase, are you getting both the real estate and the buisness (restaurant) or just the real estate. Additionally, most of the furniture, fixtures and equipment (FF&E) associated with a restaurant is considered part of the buisness and not the real estate. These are things that could be very important if the restaurant closes (as they are in foreclosure).Lastly, you'd want to consider the amount of office space that is currently available for rent in the area, what they are asking in terms of rent (net or gross basis) to see if the area could even support the additional space should it be renovated. Also, medical space (including dentists) require a significant amount of plumbing way over and above typical office space.It seems like there a lot of unknowns to this "deal" as compared to just holding on to a piece of land for eventual resale.Good luck.

[digitalmonkey 929]

Do you have some black friends who can start hanging out around the area and drive the price down even further?

[hblask 1]

I talked to a banker today about this, and he did some on the spot research. First, he knew the location instantly and recognized it as one of the best suburban locations in the Twin Cities.Then, he checked the tax records. I don't know how it works in other areas, but around here your "tax valuation" tends to be 20-30% below the actual market value of the land. (I have no idea why they do this, it seems to me they could just assess at market value then lower the rates. Maybe it keeps people from challenging the valuation in court?). Anyway, the latest valuation had the land at $480,000, and the building at about $279,000, so even at the deflated tax valuations it's over $750K. So that makes the $850-$900K seem very reasonable, and, with the right buyer at the right time, over $1M.Another interesting point: because of a claim I have on the land, he thinks I could grab it for as low as $350K, almost definitely for $400K. The only way someone could prevent me from getting it that cheap is by paying somewhere around $630K for it. That is HUGE. Just monstrous, in my opinion. I have a lien on the property that anyone else would have to pay off, whereas if it goes to foreclosure, I get first dibs on grabbing it for whatever deal I can make with the bank -- hence the $350K-$400K range. And the bank is likely to want to do that rather than go through an expensive foreclosure process, own the land, put it back on the market, and try to sell commercial real estate in an uncertain market.Basically, the banker was very optimistic after I explained everything to him, but he said the first thing was to ask the restaurant for their finances and see what their actual sustainable cash flow really is, and if they'd be willing to lease it, and at what price. If either of those doesn't work out, then I either need some deep pockets, or I lose my lien and a big chunk of money. Or, scramble and find someone who wants to run a restaurant, right now. (My college roommate runs one of the top restaurants in the area, a Minneapolis institution for something like 80 years now, so I may be able to find someone through him.)If I seem like I'm babbling on about this, it's just because I know there is a ton of expertise here on this forum, I have little, and I'd appreciate any advice or warnings -- so for everyone who has helped with that, thank you.

[hblask 1]

If you're thinking of acquiring the property with the intention of keeping the existing improvements, I would not give much weight to the previous contract. Walgreen's was essentially acting as a user in need of a site and willing to pay a high end of the range (if not above) market price for a "specific" site.A few other things you might want to consider. If you purchase, are you getting both the real estate and the buisness (restaurant) or just the real estate. Additionally, most of the furniture, fixtures and equipment (FF&E) associated with a restaurant is considered part of the buisness and not the real estate. These are things that could be very important if the restaurant closes (as they are in foreclosure).Lastly, you'd want to consider the amount of office space that is currently available for rent in the area, what they are asking in terms of rent (net or gross basis) to see if the area could even support the additional space should it be renovated. Also, medical space (including dentists) require a significant amount of plumbing way over and above typical office space.It seems like there a lot of unknowns to this "deal" as compared to just holding on to a piece of land for eventual resale.Good luck.

Thanks, good stuff. Realistically, remodeling and turning into something else is a deal I can't handle, because presumably I'd need to cover most of that costs, adding to an already uphill battle.The banker did say he could talk to investors he knows about different ways of making this happen. The bank is one of those small banks that caters to entrepreneurs and investors, so they definitely would know the right people. And I'd have no problem giving up shares of this in order to make it happen. Heck, I'd only need about 1/4 equity in the place to make it a huge thing for me.

[hblask 1]

Do you have some black friends who can start hanging out around the area and drive the price down even further?

This is Minnesota.

[mrdannyg 274]

A little background perhaps. How did you end up with a 6-figure lien on a property, but not have a plan as to how to go forward with it?Guess it doesn't really matter, just curious. As one of the main creditors, you will certainly be in a strong position to buy it out if you're able to put together a full proposal and deal with the senior lendor.

[hblask 1]

A little background perhaps. How did you end up with a 6-figure lien on a property, but not have a plan as to how to go forward with it?Guess it doesn't really matter, just curious. As one of the main creditors, you will certainly be in a strong position to buy it out if you're able to put together a full proposal and deal with the senior lendor.

The restaurant guy was supposed to be paying back the loan over the last 5 years at a 10% interest rate. The land was appraised at about $1.5M at the time, and they had around half a million in loans, so it seemed like an easy, safe bet. Instead he paid for about a year. Then various parties kept looking at buying it, so it didn't seem urgent, since the interest kept accruing and there was still lots of value to spare.But now, time is running out, with the first mortgage bank losing their patience, so it's time to make a move.There's a lot of things that could happen that I would get my money back. (They are working deals on their side, too.) The only way I won't get it back eventually is if it forecloses and I can't figure out a way to pick up a million dollar property for $400K. Other than that, I either get my money back or buy a huge valuable property for less than fifty cents on the dollar.

[digitalmonkey 929]

I talked to a banker today about this, and he did some on the spot research. First, he knew the location instantly and recognized it as one of the best suburban locations in the Twin Cities.Then, he checked the tax records. I don't know how it works in other areas, but around here your "tax valuation" tends to be 20-30% below the actual market value of the land. (I have no idea why they do this, it seems to me they could just assess at market value then lower the rates. Maybe it keeps people from challenging the valuation in court?). Anyway, the latest valuation had the land at $480,000, and the building at about $279,000, so even at the deflated tax valuations it's over $750K. So that makes the $850-$900K seem very reasonable, and, with the right buyer at the right time, over $1M.Another interesting point: because of a claim I have on the land, he thinks I could grab it for as low as $350K, almost definitely for $400K. The only way someone could prevent me from getting it that cheap is by paying somewhere around $630K for it. That is HUGE. Just monstrous, in my opinion. I have a lien on the property that anyone else would have to pay off, whereas if it goes to foreclosure, I get first dibs on grabbing it for whatever deal I can make with the bank -- hence the $350K-$400K range. And the bank is likely to want to do that rather than go through an expensive foreclosure process, own the land, put it back on the market, and try to sell commercial real estate in an uncertain market.Basically, the banker was very optimistic after I explained everything to him, but he said the first thing was to ask the restaurant for their finances and see what their actual sustainable cash flow really is, and if they'd be willing to lease it, and at what price. If either of those doesn't work out, then I either need some deep pockets, or I lose my lien and a big chunk of money. Or, scramble and find someone who wants to run a restaurant, right now. (My college roommate runs one of the top restaurants in the area, a Minneapolis institution for something like 80 years now, so I may be able to find someone through him.)If I seem like I'm babbling on about this, it's just because I know there is a ton of expertise here on this forum, I have little, and I'd appreciate any advice or warnings -- so for everyone who has helped with that, thank you.

Jeff?

[tobytobey 0]

Then, he checked the tax records. I don't know how it works in other areas, but around here your "tax valuation" tends to be 20-30% below the actual market value of the land. (I have no idea why they do this, it seems to me they could just assess at market value then lower the rates. Maybe it keeps people from challenging the valuation in court?). Anyway, the latest valuation had the land at $480,000, and the building at about $279,000, so even at the deflated tax valuations it's over $750K. So that makes the $850-$900K seem very reasonable, and, with the right buyer at the right time, over $1M.Typically, the County auditor estimates a Market Value and then develops an Assessed Market Value for calculation of real estate taxes. In Ohio, the Assessed Market Value is 35% of the Market Value. I'm not sure what a "tax valuation" would be.....it seems odd. When was the last valuation completed? Again, where I live the County updates their values every 3 years. In some areas it can be up to 6 years between valuations. You should definately find out when the last update was completed, because if the most recent valuation is 3-4 year old, values have come down (in most markets).Do you know of any sales of similar propeties that you could compare this one too? This would be the best indicator of value.Another interesting point: because of a claim I have on the land, he thinks I could grab it for as low as $350K, almost definitely for $400K. The only way someone could prevent me from getting it that cheap is by paying somewhere around $630K for it. That is HUGE. Just monstrous, in my opinion. I have a lien on the property that anyone else would have to pay off, whereas if it goes to foreclosure, I get first dibs on grabbing it for whatever deal I can make with the bank -- hence the $350K-$400K range. And the bank is likely to want to do that rather than go through an expensive foreclosure process, own the land, put it back on the market, and try to sell commercial real estate in an uncertain market.Another important detail is to check the real estate taxes for the property. I would not be surprised to hear that they have not been paid and have delinqencies including pentalties and interest. When properties are foreclosed, the government gets first cut to recoup any outstanding balances, before the bank and then lien holders. If their are any outstanding taxes due, they (and any other liens for that matter) would need to be addressed in the event of a sale as well.Good luck.

[hblask 1]

Typically, the County auditor estimates a Market Value and then develops an Assessed Market Value for calculation of real estate taxes. In Ohio, the Assessed Market Value is 35% of the Market Value. I'm not sure what a "tax valuation" would be.....it seems odd. When was the last valuation completed? Again, where I live the County updates their values every 3 years. In some areas it can be up to 6 years between valuations. You should definately find out when the last update was completed, because if the most recent valuation is 3-4 year old, values have come down (in most markets).

It's something like that here, where the assessed value is some percentage of the actual value. I've never cared enough to worry about it, because fighting it would mean maybe $100 per year difference on a typical home. They do valuations every year in Minnesota, and he pulled up 2009.

Another important detail is to check the real estate taxes for the property. I would not be surprised to hear that they have not been paid and have delinqencies including pentalties and interest. When properties are foreclosed, the government gets first cut to recoup any outstanding balances, before the bank and then lien holders. If their are any outstanding taxes due, they (and any other liens for that matter) would need to be addressed in the event of a sale as well.Good luck.

I think that was one of the numbers the banker pulled up, and it looks like he's a couple thousand behind, which isn't too bad. It may have something to do with taxes being escrowed and the mortgage company has to pay them even if the borrower didn't pay enough to cover it. That kind of stuff is why I hire good lawyers, bankers, and accountants who can give me a number at the end for me to say yes or no. I have no interest in learning the details of the tax system when I can just pay someone to do it for me.

[phlegm 6]

This is Minnesota.

Are you suggesting there arent many blacks in minnesota, or that they dont affect land values?

[hblask 1]

Are you suggesting there arent many blacks in minnesota, or that they dont affect land values?

It's a mostly white state.

[BigDMcGee 3,352]

I may have a chance to get about a million worth of land for $450K... I just need somebody to lend me $450K for about a year or two, at say, 9% plus a portion of the proceeds from the sale. So why wouldn't you just buy it yourself instead of loaning me money? Because you don't know where it is, plus I can arrange for a cash flow to service the loan until the property sells so that the money earns something in the meantime. Think of it as a finder's fee.

This sounds like the hook of Fargo.

[hblask 1]

Update on this, if anyone cares:I talked to the owner again last night, he thinks they could lease it for $5K/month and still make it worth it to run the place. No matter how I run the numbers, unless I can get it for under $400K, and pay that down a bit, I just can't justify it for that.And then I watch at least $750K of property go to some deep-pocketed third party for $450K instead of me.

[AmScray 355]

Henry- are you in to Tax Lien investing?I kinda am too... If so, shoot me a PM. I have an ongoing project.

[tobytobey 0]

Update?

[hblask 1]

I talked to the restaurant owners in person... they said the bank has been threatening them for a long time. The son thinks they aren't serious about foreclosing in February, it's just another scare tactic. I got the restaurant's financial numbers for the last three years, so I'll go over those with the banker. I don't think anything is going to happen for a long time, but I want to be ready when it does.