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I’m working on a big deal…I need a little help. - Posted by Ron
Posted by Ron on July 05, 2004 at 01:56:50:
Hello,
A little less than a year ago I posted my first and only question on the CREonline message board. I am thankful to have received some positive advice from Ed as well as from a number of other readers. Since then, I have closed on eleven properties and currently manage 22 profitable units and counting. I have established an excellent network, and have a team already in place to continue building my portfolio of properties in Western New York State.
Currently, I am working on a deal to purchase a portfolio of 90 properties (136 units). They are almost all residential (56 singles, 31 multi-family, 3 commercial). The portfolio is being managed by a 70+ year old gentleman who has built up his business over 40 years. Due to family reasons (his wife is forcing him to retire while he still has his health)he is selling the portfolio. The deal is private and is not openly listed. We agreed on a purchase price ($1.5-$2 million below market) and the seller has agreed to carry the bulk of the paper with fantastic terms (20 year balloon amt over 30yrs at a rate you won’t even believe so I won’t type it in). We will assume or wrap around the minimal amount of bank held mtgs as well. Most of the properties have been paid off. The bank held properties have no more than five years left on any of them.
Basically, we are purchasing his cash flow. It is a very low risk deal by real estate standards. The units are 100% occupied and he has kept his properties in great condition. The gem in the deal is the 7500 sq ft convenience store chain on a very busy main street with a NYSE tenant and a triple net lease for 20 yrs and 6 five-year options. The lease is iron-clad.
The deal is structured in a way that we can pull out any individual properties from the purchase money mortgage by paying the assigned $ figure for each individual property. Those figure are very low because the seller cannot go above the total amount of his purchase money mortgage which covers appx 60 properties.
I am in the process of raising $1.3mm to purchase the 90 properties valued at $5mm-$6mm with an agreed upon price of $3.9mm My plan is to raise the money in $100,000 increments, and offer a 10% preferred rate of return and use the triple net property as the main collateral.
My question is this…I have a lot of interested parties, but they are all asking for different things. Is there a better way to do this? Banks won’t touch it because they do not provide blanket mortgages on residential properties. My company (which owns the 11 properties) has not been around long enough to warrant a loan. Immediately when the deal closes, the property with the triple-net will have an excess of $800,000 in available collateral. Any suggestions on how to set up the financing without givng away 50%-75% of the equity?
Any help would be greatly appreciated…
Thanks
Ron
there are banks - Posted by michael schindler
Posted by michael schindler on July 11, 2004 at 13:37:41:
I know some small town banks would love this venture. Call and set up meetings with a few of them. My old employer (bank) as well as a couple more that I know of over here, if it was in my area, would jump at this. I betcha if you ask, you will find a small bank wiling to take the chance-and for not a lot of closing costs. Perhaps blanket mortgage all of them together-yes, many smaller banks love doing this-if it cash flows and makes ssense, they will pull the trigger and do it.
Re: I’m working on a big deal… - Posted by Nick
Posted by Nick on July 09, 2004 at 09:06:05:
Go to this page in the “Money Making Ideas” section of the CREOnline site…http://www.creonline.com/money-ideas/mm-061.html...READ IT!!! And then RE-READ IT!!!
I’m not saying that you have no deal here; but I am suggesting that you go in with your eyes wide open and with steel pants on so that you don’t get surprised from behind.
Re: I’m working on a big deal… - Posted by Andy
Posted by Andy on July 05, 2004 at 08:15:23:
Ron-
I’m not the expert, but know that there are banks that will do a loan to cover all of the properties. I strongly recommend you try to hitch your wagon on Ed & Terry’s next Lender’s workshop. Sounds like you have quite the deal here. My sister lives in WNY, and anxious to get into the biz. If you have anything you want to unload, please e-mail me.
Lastly, and again, I’m not the expert, but I believe that if you are offering $100k pieces of a $1.3M pie, you are in fact selling a security, and are now subject to the rules of the SEC. Again, I may be wrong, but I would seek competent legal advice on this one, or rather, structure the deal quite differently. You shouldn’t have to use investors other than the seller and a bank.
Good luck.
Andy
Re: I’m working on a big deal… - Posted by Dylan Kaylor
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Re: I’m working on a big deal… - Posted by William Greer
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There is something you must understand about the Soviet system. They have the
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