The Next Level Upwards

Lufos profile photo

By this time you have read a lot of postings. You have bought a few books, some of which are applicable to modern times and some are purely historical in context and some, yes some should have been printed in Early Medieval English with footnotes in Latin.



I make the assumption that you have gone out and rung a few doorbells, made a few contacts and perhaps a purchase or two. A lease option, or layoff deal which grinds a small return and the hope of a high payoff some time in the future if, big if, the market holds.



You may have attended a foreclosure sale and watched the bidding as they approach the top of the high market prices generated by todays lack of sufficient starts of new house construction in the lower price levels.



You are to coin a phrase "Checked Out." The time has come to move on to the next level. An area of increased profit and decreased activity.



Enough of the single little house or duplex with the whining tenants and the phone calls to fix a dripy faucet or quell the hords of cockroaches responding to the smell of grease and the promise of warmth in electric outlets.



Enough of hearing that the rents cannot be paid as the wage owner is in jail for beating up his ex wife or stopped in a bar on the way home and in a moment of exhuberance blew the paycheck.



Consider this: You are going down the street and you notice to your shock and dismay that the gas station on the corner has just gone out of business. Also the little barber shop next door is closed. Next to which is a vacant lot where there used to be a flower shop that burnt down a year or so ago.



You are looking at an assemblage. You are going to option those properties one by one and put them all together and then either sell or participate in the erection of a Minnie Mall, a two story or three story mixed use commercial building, whatever.



You start with the Gas station, you check to see who is the owner, is there a lease, is the lease assignable, should you offer to buy, or should you merely take over an old lease. You offer to buy and after the bargaining back and forth you convert into an option for six months. If possible you reduce this to a nice document that can be notarized and recorded. You open an escrow and you put the first property in.



Now on to the next. I would skip the next property in line and go for the end one. They are the owners of a vacant lot which does not produce income. You negotiate with them, turn the deal into an option and then throw that into the same escrow of sale.



Having surrounded the barber shop you start once again to negotiate on that. Remember when all the properties are put together they are usualy worth at least 25% more and that is a bottom figure.



Of course this is a going business and part of your pitch may be that you have a much better location for the barber shop indeed you might even offer to pay a few months rent in the new selected shop. Well why not. If you are licensed get a commission on that lease. Or if the timing is right you might offer to build a new barber shop with, are you ready, living quarters above. Oh my god barbers heaven. Of course if you are really with it you negotiate and slap on a beauty shop. You think they do not go together? They do, Oh god what I have gone thru having women cut what is left of my hair. I overpay for a good barber anyday. Besides all barbers are great intelligence operators where else do you hear all the neighborhood goodies which can be converted into future Negotiations.



Ok, ok, that is an assemblage. Very profitable to the person who goes out and hustles and puts the dirt together. You get to participate, or you can if you sing loud enough stay as prime mover and run the show. Very profitable and creative and lots of fun.



Syndication: Here comes another fun activity which does not require a knock on the door. I am sure all of you have a Doctor that you see on occasion, or an Oculist or a Cleaner. Shall I go on. Form them into a group. Tell them it is time they started to spread their wealth a little and the first thing is to invest in the furtherence of their own community. So you start with their capital and most important their credit and banking connections and you buy property.



If you are in a growing area and have a busy major street, why not option a hunk of land on a nice swing corner and then contact the Oil Company of your choice and pitch them into giving you a nice long term lease on the land. Your investors will love you.



Or you might canvas the area and see what new kinds of business are necessary to expand your town. You select the properties and once again option or you might indeed participate in the erection of the structure that will house the new doctor, or clinic. Whatever.



I am sure you see what I am saying. This is the next level and yes having funned around with this for a few years, you will then go onto another higher space.. For now concentrate on this dimension.You need the experience.



OK Creative Investors, post to this article, come up with concepts and by posting you will crystalize your thinking and perhaps stir yourself and other viewers to action.



This is written as a "sparker" come on now outdo me go crazy. Original ideas. Lets go thru this level and up above there is another. Here is where you learn to play Trumps game or Snyder if you are in California. This is the first entrance level. Once you master this one, I will show you the next one. Oops sorry the assembled Gurus, Teachers, Advanced Ones they will then take you to an even higher level.



Upwards and Onwards. Per Ardua. or at least an attractive bit player.



Lucius

Comments(22)

  • jolync26th January, 2004

    There is an empty supermarket building in a growing town near us. They were a local company, and went out of business when Albertsons and Fred Meyer built near them. The town ihas a rural feel, but is growing and has made lots of road improvements. But there are only 2 fast food places. Would a building like the old grocery be good as a family fun center (nothing like that in town) for laser tag, indoor go-carts, etc.? It is for rent. Would it be better to buy it, find a fast food company to build on the lot near it? Do you think it could work? How would you structure a deal?

    • Lufos26th January, 2004 Reply

      Jolync,



      To attempt to advise on something like that is asking for it. It cannot be done. When you play this game you are on the playing field all by yourself.



      If you have the time or a close friend who has a little Cessna, now is the time to fly over the town and get a really good look at it. So when you look at a map you will have a recall for what is really there.



      Try to figure out the directions of out growth, and also the areas when growth stopped and it collapses back on itself and begins to fill in and pack tighter in a central area.



      I do not know where your town is, or its statistics. Your solution may be perfect. If it is a Latino population you might consider turning that large market building into a bunch of tiny little rent out stores, some just counter tops, but stores. They pay you monthly or weekly if necessary. Like an enormous under roof flee market. What you are doing is duplicating the market places of Central and South America.



      Where are your larger cities? Does your town reach out to the larger cities and create bedroom communities? So much to know. Best way. You Have To Be There. Drive it and get the feel.



      Wish I could help more but, where is the town? Lucius

      • jolync27th January, 2004 Reply

        The town is Battleground Washington, just north of Vancouver, which is across the Columbia River from Portland, OR. It is definitely a bedroom community for Portland/Vancouver, but has lots of long time farmers and hobby farmers. New subdivisions also, 6 houses to the acre, not a Latino community. And lots of large $300+ homes on acreage in the hills surrounding the town. The town expanded to the west, but the high school and post office are to the east of the building, so there is plenty of traffic either way. The building is right in the center of town - main street & the highway, so it would be easy to do a very visible sign on the building. Plus, getting a fast food place would bring people in. I thought of a family fun center because there just isn't much for people to do - cruise main street, hit McDonalds, rent a movie, shop at Fred Meyer and hang out at Starbucks. There used to be a laser tag in Vancouver, but it went out of business (very small space). There's also an empty building in Vancouver near the mall that used to house a Home Base. But that area is all built up, so commercialized. Battleground retains it's small town feel, and the high school and grade school are within 1.5 mile. I don't know the population stats either, but I'll look them up. Thanks for your relply.

    • myfrogger28th January, 2004 Reply

      I am in Iowa and work in Ames and Des Moines. Family fun centers go in and out of business constantly because of the large space needed, wear and tear on equipment by kids, and high prices required to keep things running.



      This is not to say that it will not work. You just mentioned that one went out of business in a larger town. What makes you think you can start one up in a smaller town and have it be sucessful? I have no idea here...just throwing out some thoughts.



      GOOD LUCK

  • fenrir26th January, 2004

    per ardua ... ad astra !

    • jolync29th January, 2004 Reply

      Thanks for the insight. You are both right that running it myself would take tons of time. I already have one small business, and I could only do another one if I hired a manager.

      Do you have specific lease option forms I could purchase, since you are already doing this type of deal, or should I get a real estate lawyer to put it together for me?

      • Lufos29th January, 2004 Reply

        I just use standard lease forms like Walcott and I insert the option in a one paragraph statement.



        Do not be afraid to use plain language. The legal crap is really not required and there is a modern trend to get away from it.



        In full consideration of a performance as stated in the body of the lease. I give John Doe an option to purchase for the sum of:

        $1,000,000 the property herein described. This option will be for a period of 45 minutes.



        Signed and dated. Joseph Doe Feb. 1, 004

        Accepted by John Doe Feb 1, 004.



        Thats it no big deal simpler the better.



        Luicus

    • Lufos28th January, 2004 Reply

      Sounds good. Before you make your mind up and start negotiations on a Buy or Lease or Lease avec Option, I would query a few of the people walking the streets or in business near by. You ask what would you like to see in the abandoned building. The Business people will give you what they would like to help their business increase foot traffice etc. etc. The guys just walking around will give you a facility that they might use.



      Good thinking, keep working on it. The area sounds about right. Smaller towns are a bit dull for the High School crowd. Think of something that will really draw them. I think you are considering them as your basic target users.



      Cheers Lucius

    • Ruman28th January, 2004 Reply

      I ask you then if you are ready to be an owner of a small business? Will the time it takes you to get this up and running steal from your dream as a real estate tycoon? Small businesses are very time consuming. Perhaps optioning it and advertising a lease to want-to-be entrepreneurs in the area, holding it for the long-term appreciation of when this town grows?

      • Lufos28th January, 2004 Reply

        Ruman is correct, you do not want to tie yourself down into the actual operation of the activity or activities. You are the the one holding the Master lease with maybe option of ownership. You are going to sublease, or do sandwich leases. Just like Trump, shhh dont tell him. He copied it from his father Frank.



        We did one here. Old abandoned building owned by Bank of America. We long term leased it with option. We set it up for lots of small Latino merchants selling everything in the world, from socks to rocks. Biggest investment was the bathrooms. Ran for about two years and as the bank was getting edgy we bought the place with a loan from who else. Bank of America. I often wonder if the branches really talk to each other.



        We set up a Syndicate who then bought it and their return on investment is a steady 12% plus whatever value increases as to building worth. Frankly its a zero but there are people out there still buying into the up market.



        I am sure the teck looks familiar. Go back in History nothing new. Trump and Snyder do it here in the present. If you buy correctly and do not load it with super debt it will float thru a market reduction with no pain. Just do not get greedy.



        Fun time. Lucius

  • mcldavid31st January, 2004

    Thanks Lucius ,

    printed and posted..on my "short term / mid term " goal.

    David (mcldavid)

  • Kathleen2nd February, 2004

    Ok Lucius, here goes. BUT this is not the next step up for me, I’m just a “newbie” . Here is a post I made about a week ago



    I know NOTHING of commercial development, I'm just trying to find an easy no money flip. But what I found is this: VERY upscale neighborhood for EONS, big lots, big trees, builders coming in and tearing down the old $300,000 houses and putting up half-mils. 1.12 acres CORNER LOT on busy intersection, across the street from big hospital and medical center AND about 1/2 mile from ANOTHER hospital. Realtor just put up sign has it posted online for $339K. House built in 1900 !! WILL be torn down by someone. Of course I'm thinking PERFECT place for a Walgreens! The Script volume alone from two hospitals, but there isn't a Walgreens within 5 miles, (by my house there are 4 within 5 miles!) What I have found so far is that it is in a LITTLE unknown municipality of 284 people. Just about 1/2 mile down the road is the Country Club. Zoning online says it's unincorporated and Municipal ?? AND I have no money but my brothers may help with some initial funding we might be able to scrape up $50K. BUT what to do? Try to contact Walgreens? Go to the "trustees" of this little community? Do we have to? If there is a hospital across the street and a country club down the road, does this mean that zoning would uphold a commercial endeavor? How long would something like this take? Are our meager funds to small to try this? Should we just get an option contract and try to re-sell to some home builder that's been redoing homes in the area? OR should I just scrap this crazy idea and stick with trying to find a motivated seller to flip a property and STOP dreaming?? ALL suggestions, comments are really welcomed. THanks in advance, Kathleen.



    Oops! Fogot to add other houses down the street sold within last 1-3 yrs at avg ofg $285K. Also is listed through Assessors online info to a Trustee. Waiting for back tax info on original owner's name to check for obituaries.... Could now be held by family members... Could make this even more difficult ??

    Kat





    … Basically I’ve scared myself _____less BUT I haven’t given up. I “think” I’ve decided to go the easy route and try and put an option to purchase contract with very long due diligence time frames – and try and flip to a luxury home builder. GFOUS was awesome in sending me a piece of a contract that looks great, and I’m trying to “piece” it into a regular options contract, by putting in the regular stuff up front, auth to assign, etc.. But I’m afraid I’ll make a mistake in the contract and won’t have a legal way out.



    DO I do my best on the contract and then get an attorney to look at it and finalize? Do I come up with the funds for the due diligence work and pray that I get it back one way or another (I have no funds for this myself). I keep thinking that if I go slowly, and methodically, that I might just make a small tidy profit, say $10,000 - $20,000 to split with my “investor” of the due diligence and attorney money, to give me enough start money to do regular old newbie deals.



    Okay, now, BLAST me with the facts, opinions, comments and suggestions. (I LOVE this board) Kathleen.

    • omega12nd February, 2004 Reply

      " DO I do my best on the contract and then get an attorney to look at it and finalize? "



      That will be the chepest way to go. RE attorneys are ussulay not that expencive so I would advise you to relay on your instinct and desire to make a deal and leave to your attorney to make it final. Good luck !





      Goals are nothing more than dreams with a time frame

    • Lufos2nd February, 2004 Reply

      Dear Kathleen,

      Omega speaks the truth check your paper work with an attorney.



      First check your zoning, see if it is possible. Then if it still land-for-sale/land/zoned-residential">zoned Residential, go down to the Planning Department in your Building Dept and ask questions, like would they like a commercial activity on that parcel. Try not to tip your hand, just pretend you have a rich relative who is thinking about it. Then as it seems to be Broker listed, go talk to him and see what kind of a deal can be made. Start your deal and half way through swing to an option with very very little money down or you might if it is better increase the offer price a bit above asking in exchange for an option at which time just a token $10 changes hands.



      Check the size of the parcel very quickly try and see what the soil is like. Developers get so angry when they stick their spades in the ground and at the first bit, water!



      Away you go and get back and post and all these genius type persons will help you move up to the next level. And guess what you just skipped level one.



      Cheers Lucius

      • omega13rd February, 2004 Reply

        Yes Kathleen, I agree with Luicus too and what he meant to say, I believe was " and all of US genius types will be here to help". Good luck with your project. It's home work time!

      • Kathleen3rd February, 2004 Reply

        Lucius, regarding your comment to go to the Planning Dept and see if they would like to see commercial. Would they have any leverage in getting it land-for-sale/land/zoned-commercial">zoned commercial if the itty bitty "city" of 248 persons doesn't it want it land-for-sale/land/zoned-commercial">zoned commercial?



        OK, next question, IF for some reason all goes well and it could be rezoned commercial (or already is, miracle) would you go to a certified commercial broker and see what they can bring to the table or if they can deal with a "Walgreens" or do I attempt to contact a "walgreens" type by myself.



        You guys are AWESOME !! Thanks! Kath

    • Lufos3rd February, 2004 Reply

      The Planning Department is normaly responsive to the desires of the local population and or politicaly active persons. You should check this first. As to a Commercial Broker, I would go direct to Walgreen. Start with a telephone call and see if you can get thru to "Site Selections" or "New Store Sites" Every entity have a different name.



      Given their imput you then make the decision as to tie up of property.



      Sincerely, Lucius

    • omega16th February, 2004 Reply

      Kat, knowing what you want from Walgreen ( numbers would be fine) before you contact any Commercial Broker would help you get a better service and most likely a better comercial deal. before selecting a broker do interview as per his/her experience in negotiating deals with large retailers. The clearer your thoughts about what you'd like are, the better the service which you'll get from chosen broker it would be. Good luck!

    • omega16th February, 2004 Reply

      Kat, knowing what you want from Walgreen ( numbers would be fine) before you contact any Commercial Broker would help you get a better service and most likely a better comercial deal. before selecting a broker do interview as per his/her experience in negotiating deals with large retailers. The clearer your thoughts about what you'd like are, the better the service which you'll get from chosen broker it would be. Good luck!

  • omega16th February, 2004

    Nice 'sparker" Lucius and per your suggestion I have few comments and as many question bellow.



    First, you sad:



    "You offer to buy and after the bargaining back and forth you convert into an option for six months."



    Can you please elaborate some more on:



    1) The type/kind of option sparked young investors would use in tying up the closed down gas station property. The elaborate response should consist explanation on what could possibly be the reason for owner, anxious to rent again, to allow you to have such long lasting escape hatch to remain open?



    2) How can you put two unrelated properties owned by two separate owners in one escrow?



    3) Can this level of investment be skipped on the way to the next or this step in your opinion has to be stepped on 100%. My guess is that this step is necessary if you otherwise do not have investors or credit available to tackle the larger deals. If anything else, please ad on.

  • omega16th February, 2004

    Nice 'sparker" Lucius and per your suggestion I have few comments and as many question bellow.



    First, you sad:



    "You offer to buy and after the bargaining back and forth you convert into an option for six months."



    Can you please elaborate some more on:



    1) The type/kind of option sparked young investors would use in tying up the closed down gas station property. The elaborate response should consist explanation on what could possibly be the reason for owner, anxious to rent again, to allow you to have such long lasting escape hatch to remain open?



    2) How can you put two unrelated properties owned by two separate owners in one escrow?



    3) Can this level of investment be skipped on the way to the next or this step in your opinion has to be stepped on 100%. My guess is that this step is necessary if you otherwise do not have investors or credit available to tackle the larger deals. If anything else, please ad on.

    • Lufos7th February, 2004 Reply

      ok Omega school is in session.



      When a gas station closes down there is some very interesting problems. Mostly about soil condition after years of petroleum products in the soil. You usualy have to do a lot of primary investigation prior to any purchase, so the norm has been to take an option for a period of time to get all of these investigations and tests done.



      Believe me the average owner of the land on which sits the prior gas station is a little bit nervous. He is keen to get the show on the road, so you take an option.



      Dear Omega, I think the largest amount of properties of different and diverse ownership that I ever put into a single escrow was over 500. That was done in Denver, I think it was called The Mile High Center. This was not a comment on the heavy drinking of the Colorado population but rather because of the ground hight above sea level. I helped gather that for Mr. Wild Bill Zekendorf you know the guy that bought the Empire State Building with masses of strange paper.



      My suggestion is to try and tie the property up with an option. You may be able as I said, to get a variance without removal of the buried fuel tanks. That would probably be for a lease under five years.



      I must tell you in smaller communities near major freeways these are winner deals, well worth chasing.



      Yes you are correct, the option time does give you time to gather investors or syndicate a group, or sell a child. Whatever.



      Cheers Lucius

Add Comment

Login To Comment