| Commercial development problem |
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halis123456789
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Joined: 30 Jan 2007
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| Commercial development problem |
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I'm trying to learn more about commercial deals and investment property, so maybe someone can help me with this problem that I am interested in.
Investor A has a piece of commercial ground say $600,000, of which $450,000 is equity and $150,000 is a note. The ground is unimproved, but resides near two major highways and an exit ramp, so the location is outstanding. The property will require site work and excavating.
Investor B wants to purchase the property for $600,000. The investor will spend $1,600,000 as follows: $800,000 will be spent preparing the site. 60% of the ground will be sold for $875,000 to a business so they can build their own building. Another $800,000 will go to building shops on the rest of the ground.
The leases on the shops built will bring in roughly $150,000/year once fully leased.
The problem is, Investor A does not want to sell the property outright, as it is a gem, but wants to develop it and retain part of the leases as cashflow. Investor A is willing to invest part of his equity to own a percentage of the deal. His other concerns are that he has a debt to be paid in order to do anything to the property, as well as the tax ramifications of receiving any money from a sale (if you remember a business will be buying roughly 60% of the ground once improved.)
Investor A would like to come to a deal with Investor B (who is motivated to work something out) in which he can:
1) receive cash out
2) invest part of his equity to receive a percentage of the rental income
3) minimize taxes
4) pay off his debt
How can a deal like this be worked out? An example with actual numbers would help me understand how things like this work.
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Mon Feb 12, 2007 11:04 pm |
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halis123456789
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Cash: $ 1.95
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no replies...is this one too confusing?
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Tue Feb 13, 2007 9:54 pm |
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Bid-Palace
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That is a complicated scenario that involves a lot of parties. I have never dealt with anything like that but do not see why it couldn't work out if the numbers are what they are and everybody is able to do the deal. I currently do not handle commercial deals and not 100% of the restrictions and policies as far as the lender aspect and getting cash out. Hard Money then Refinancing is one way to cash out but those improvement amounts are going to be difficult to get a lender to finance unless the investor is reputable, credible,etc.. but hell.. I may be wrong..
I like to keep it somewhat simple yet try to keep my options open on any deal.
I hope I could help out and sorry i didn't get to all the questions but that is a complex deal that requires a lot of calculations, contracts, trust, time, and patience.. I wish the best of luck
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Wed Feb 14, 2007 2:16 am |
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halis123456789
New Member
Cash: $ 1.95
Posts: 9
Joined: 30 Jan 2007
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No more thoughts on this one?
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Mon Feb 19, 2007 7:30 pm |
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