I Have A 30 Day Option To Purchase On A $2.4 Mil Propery, Help!
I have an option to purchase an Inn for $950,000, appraised at $2.4 mil, market is $1.7 mil.
I have two very interested parties. What is the easiest way to make a lot of money on this one?
I take it you don't have the cash so you could do a contract assignment or find the money for short term use and do a double close.
Sell the condos for $350,000 each and convert the rest to loft space at $450,000......
Just kidding. You really need to give some more info so that someone could even come close to giving you applicable advise.
First off, it is unreasonable to close on a commercial property in 30 days. I wouldn't waste my time pursuing this.
However, if you do want to, we need more info.
Is the property a franchise or independent?
Who is running the hotel?
Are the current numbers good or is the apprasial and market value based on future possibilities?
I really think you should be hooking up with a quality broker and also seeking short term financing.
I sure hope you didn't put up much for option consideration.
Here are some more details on the property. The appraisal was done in 98', many improvements have been made since then. The Inn is not open, simply opening the doors would increase the value dramatically. I am really looking for investors that can close quickly, have the cash available without having to get a loan. I put one dollar down for the option consideration so there is no huge commitment financially, I simply wanted to secure the property for 30 days and see if I could flip it. The price goes up alot after my option period, someone can get a great deal with this. I have actually talked the seller into taking $900,000 at this point instead of $950,000, I just want to clear $50,000 from this and turn it over to a buyer. I have 2 very interested parties at this point, they want to look at it Friday, they have the money available to purchase without obtaining financing, I just need the best scenario to make this go quickly. Is it possible to simply assign the option over without having to go on title? I know this is a touchy subject, especially in NC. Please look over the details below, if anyone has done a similiar deal I sure would appreciate the feedback. Take care.
Property Details:
This property is not only far more valuable than the asking price, but is continuing to appreciate very rapidly in value. It is not in operation now, however it is operational. It was purchased out of foreclosure and renovated, there are no financials. Just by opening up for business, it could easily create a very profitable turn over, or a long term investment.
Resort/Restaurant/Motel, Retreat, located in the great Smoky Mountains, Macon County NC on the N Ga line.
Property description: size: nine acres (mol) with seven buildings, which include 35 motel rooms, two (two bedroom) apartments, a restaurant with a banquet size commercial kitchen, offices, a dance hall with hardwood floors, retail and exercise space, lobby/check in, laundry room, maintenance area, utility and storage areas, two cottages, a conference center, an outdoor revolving theater, swimming pool, entertainment deck w/fire pit, RV and camping sites, a volley ball court, ponds, creek, views and beautiful mature landscaping. It is being offered as is. It needs work. Included in the sale is the furniture, (at least 95% of the rooms are furnished). The linens, including table cloths, napkins, sheets, spreads and blankets, dishes, glasses, kitchen equipment, walk-in cooler, walk-in freezer, sinks, tables, new exhaust hood w/fire system, commercial dishwasher, stove, char grill, deep fryer, convection oven, refrigerators, new 900lb ice maker, soda fountain, coke machine, dining room tables and chairs, coffee machines, new commercial washer and dryer, satellite TV system, color TVs (12), Piano, mirror ball, pool equipment, outdoor tables and benches, office furniture, Credit card terminal, web site, telephone number, and PO box. All of this is being offered at only $950,000.
The roadways and parking are paved throughout the resort. (Some areas need repaving or sealer.) There are several ponds, bridges, creeks, stone walls and walkways throughout the property. The landscaping is mature with tall trees and ivy covered walls. The views both approaching the property and at the property are magnificent.
Bldg -one- The main building consist of a 75 seat fine dining restaurant, a banquet size kitchen (with new exhaust hood), a banquet/dance hall (seats 120), a lobby and check in area with public restrooms, guest suite, a two bedroom managers suite, offices, and room for an exercise work out area, and retail area.
On the lower level of this building is a full commercial laundry room with new commercial equipment, a linen room, a satellite TV system, a workshop, a garage for lawn equipment and ATV’s and several storage rooms. There is a huge outdoor dining patio and BBQ pit off the dining room.
Building -two- consists of 10 large motel rooms with private balconies, private baths, color tv’s, and refrigerators and one utility room. (This building has been updated with new color TVs, carpeting and interior paint.)
Building -three- consist of 10 motel rooms. This building needs cosmetic work on the outside including repairing the soffits and facia boards, inside needs painting and TVs. ( some of the sliding glass doors need new glass and the carpeting could use up dating)
Building -four- consist of 14 large motel rooms with private balconies, private baths, and refrigerators, one two bedroom suite (which needs renovating) and two utility areas. This building needs soffit and facia repairs, exterior railings and painting outside, Inside it needs painting, carpeting and TVs.
Two cottages -( buildings -five and six- ,) both need renovating inside and painting outside. (Both have bathrooms)
Conference center building -seven- seats 120, has a private entrance, private parking and is next to the revolving outdoor theater. It also has outdoor tables with umbrellas and two restrooms. This building has a new roof and a newly refurbished central HVAC System. (This building needs cleaning and painting. (banquet tables and chairs are included)
The water supply system including the new well, pump, and holding tanks and buildings are installed. The system was designed and approved by the Macon County Health Dept. (The water supply system buildings are new) The grease traps have been replaced to meet the requirements of the Health Dept.
This charming resort is located in one of the prettiest spots in the smoky mountains. It has recently been renovated and brought back to life. It is ready for you to open the doors for business, however it does need some work.
The major systems on the property have been completely replaced or brought up to code. This includes new swimming pool and equipment, roofs on two of the buildings, new water system, new grease traps, new energy efficient heating and air central units, All new restaurant equipment and systems, new laundry equipment, new color tv’s and system, new hot water tanks, new plumbing, up dated electric, improved roadways and parking, new signs and a completely renovated lobby with a stacked rock fireplace.
This property is beautiful every month of the year, and is located in a prime location, close to everything the mountains have to offer. There is plenty of room for expansion, or even to build an owners home on the property. This area is experiencing rapid growth. Research indicates that a fine dinning establishment and lodging are top of the list for businesses needed in this area. We are located right in the path of growth.
This resort is being considered for a setting in a major motion picture.
The possibilities for producing income at this property are endless. To name a few: 35 motel rooms $65. Per night, two two bedroom suites $119. per night, two cottages - daily, weekly or monthly $129. Per night, RV sites $33. Per night, camp sites $16.per night, 75 seat fine dining restaurant (Average daily $1500.), 120 seat conference center (per function) $300. to over $5k, 100 seat banquet hall (Per function) $300. to over 5k, groups may include meals, lodging, functions and entertainment. This portion of the business is by far the most profitable. This would include, private groups, clubs, families, and businesses. An exercise room, massage therapist, a gift shop, vending machines, an outdoor theater for weddings, plays, concerts or movies, tours, on site and nearby attractions, catering, on site and off, lectures, classes, retreats,
,
This property was appraised at $2,400,000. The market value is $1,700,000. It has been reduce several times and is now being offered at only $950,000.
This does seem like an outstanding price, even though I don't know your area. It is clear to me that this property in my town would be worth much more than 2MM. Either way I would first seek to extend your option to 60-90 days.
Although it is possible to close faster, it likely won't happen. Even if your buyers have the cash available, they probably want to do quite a bit of due dilegence.
On another hand if it is clear that they are buying a property so cleaply, they may want to jump on the opportunity.
Since you are only looking to make $50k here I think you should assign. I was thinking that you were hoping to flip this property and make a half mil or more. Selling that close to retail will take time. If you are willing to take $50k knowing you made someone a hell of a deal, then this deal might be done in 30 days.
I would aggresively seek to expend the option to 60-90 days.
Hello,
If the person who sent me a private message could please email me at: **Please See My Profile** I would appreciate it, I do not have access to that section. Thank you.
I am currently selling my option on this property for $15,000, it was $50,000. I thought this would be easier for an investore to part with, it would need to be a quick transaction, this option is for 30 days, it would need someone that can close quickly. I talked the seller in to taking $900,000 for it, but only for the 30 days. This has huge equity, $15,000 is peanuts for the goldmine someone is going to have the rights to. Take care.
Mark
investorsedge,
SO what has become of this deal ???
Nothing yet, still available.
Investorsedge,
Did you ever find an investor for this deal? Everyone wants to know
No. It's still available.
Adam,
So there's a 46AC parcel owned by Ms. Enron on the market for $599K and a 35AC landlocked piece for sale for $399K--correct?
For starters, I hope you had your offers drafted by a RE attorney and that they contain contingencies for due diligence and subdivision.
I would look at values for the 35AC and 46AC parcels in the context of how each parcel could be developed--how many lots and ballpark of costs for roads, etc -- horizontal improvements--as well as what a new house would realistically sell for on its lot.
In my area, a landlocked parcel cannot be subdivided. Subdivision & land development ordinances require that the property own frontage on an existing road. So if that were the case in your area, the 35AC would, at best, be one building lot, and I think the town would probably require an access of more than 4' wide.
Nancy
Nancy:
Thanks for the response.
Yes - those are the right #'s.
We did not have the offers drafted by an attorney, but rather by a broker that knows land deals around here well, or so it seems. We have contingencies for about 100 days due diligence, one "based upon partner's approval," and one "based upon favorable appraisal." We didn't do one for subdividing for a reason:
The owners of these parcels live right up the street from one another. We're thinking that if they were to get offers at the same time through the same RE agency from the same buyer, that perhaps if they chatted, and knew that we planned to make some $ by subdividing, that they may be prone to teaming up and holding out for higher selling prices. Especially since this will be a NIMBY-type thing. So, we plan to put in offers from two different parties (with "and/or assigns" spelled out), through two different agents (same office, though), and about two weeks apart (probably not that big a deal during the holidays - who's out buying property right now?). Just in case.
This is the type of area that just has larger lots - pretty much the going size are 5-8 acre lots, that sell for $225,000-$400,000, with houses anwhere from $550,000-$1.5m (wide range). So not to buck the trend, we'd go for lots no smaller than say 4 acres. We figure we could create perhaps 13 building lots.
The 35 acres is not technically landlocked, as it does have a dedicated road easement with a rough two-track going through the 46 acre parcel to it, so that would already save us some $ as it has already been graded roughly. And I have looked into this - we can definitely develop this parcel.
Gas and electricity are already on the 46, gas already on the 35, we'd just have to continue them into the new lots. Wells and septic are the norm here - that cost will be on the new lot owners, for the most part.
We're estimating that we'll pay roughly $880,000 for both. We're thinking that between horizontal improvements, taxes, permits, surveys, legal, etc. we'll pay perhaps $500,000. Broker's comm on the back end $165,000. Misc. another $40,000. Principal payoff & down pmts, $880,000. Cost of loans $195,000, based upon three years, in case it does take that long. Should still leave us with a pretty penny, assuming that with appreciation, our lots will probably gross about $3.3m for us. Nope, it's not as good as if we were able to split into 2 acre lots like the zoning allows, but we wouldn't want to destroy the character of the neighborhood.
My biggest question right now is, knowing what I know about the owners of the 46, would you gamble and offer quite low on this parcel - like in the $400's - or somewhere around $525,000? (Remember that the 35 acres assesses at $440K and is offered for $399K; this parcel assesses at $460K and is offered for $599K.) I don't want them to reject the offer outright, but it seems to me that all signs point to them being motivated sellers.
Thanks!
Adam,
Concerning the 46 AC parcel...
Hopefully, Ms. Enron isn't mortgaged up to the hilt on this property and could sell for less than $599K. Maybe it's just me, but I'd want the offer contingent on subdivision approvals, particularly since there would be on-site sewer. So if the numbers work at close to $599K, that's what I'd offer, but I'd want terms.
Good luck with your offers and keep us posted.
Nancy
Nancy:
)
Thanks for your advice. (I was hoping it was you who responded to me!
I'll take your advice to heart, and have another chat with the others in this "syndicate." We'll go from there. I'll post later with an update.
Adam
Adam,
Among the key issues here, as I see it, are the number of lots and site improvement costs (streets, curbs, etc). If you were to have a RE attorney include the customary development contingencies in your contract, you could bail if the number of lots was reduced (because of on-site sewer, town approval, whatever) which would result in increases in the per-lot land cost. Also, you could reserve the right to bail if the town imposed unacceptable conditions for approving the subdivision--conditions that might substantially increase site improvement costs.
Good luck.
Nancy
Is the property already zoned for what you want to do? You mention that this could be a NIMBY issue. Keep in mind the following:
1) If rezoning is unlikely and you know that right now, seeking rezoning would mean a lot of time and money spent on your side of things with a low likelihood of success.
2) If you seek to rezone the property prior to closing, not only will the sellers see the posted signs but even before you get to that point you will more than likely be required to get their signature, as the owner, on any and all rezoning or subdivision plat submittals. If you plan on subdividing prior to closing you will not be able to hid this event from them. If you don't plan on subdividing or rezoning prior to closing you better make darn sure your price/numbers work at the contract amount or you will be in a world of hurt.
3) Unless your area is different than probably 99.9% of the rest of the world with zoning, a deeded, private easement does not constitute road frontage for subdivision purposes. Typically you will be required to have frontage on true publicly owned and maintained right of way. I would check with your county zoning dept. prior to even putting forth an offer. If your buyer's agent is truly well versed in land deals in the area they should either know this immidiately or take the time to call around for you to get the answer you need.
4) If lots are to be on septic, it is obviously critical for you to do soil testing prior to closing. In fact, soil testing is the first thing I would do, well, at least first thing right after a survey.
The fact that these properties have been on the market so long raises a red flag with me. Around here, land that is already zoned and ready for a land disturbance permit takes all of maybe 5 days to get under contract...it does not sit for a year+ unless something is wrong with either the property or the price.
how about putting an option on both properties by offering 5-10k each.
then you go about subdiving and rezone or whatever and after thats done the value probably will go up. then you can exercise and fiip the land quickly since it's been sub-divided already.
just my 1/2 cent.(not even worth 2 cents here!)
Thanks to you all for the advice. Isn't the internet a beautiful thing?
I'll be having a conference call in the morning with my group to see if any of your advice changes our plans. We haven't yet submitted an offer.
Adam
Here's a question, though:
These two parcels, six years back, were one and the same. Then the split took place. If it is in fact true that the easement through the 46 acres isn't good enough to be able to subdivide the 35 acre parcel, can we just legally put them back together and then subdivide our one 81 acre parcel? If so, how much work is involved in putting back together adjacent lands, which is pretty much the opposite of subdividing?
Thanks again.
Adam,
If the 2 parcels are contiguous, you can apply for subdivision of them as one project. Putting parcels together (regardless of whether they were ever on one deed) is called an assemblage. Assemblages are not unusual at all. Obviously, you would have to purchase both in order to be able to do an assemblage.
What Nancy said!
If you buy the parcel with road frontage you should be ok. One local city here actually requires us to record a "combination plat" before they will let us subdivide an assemblage if you can believe it. Talk about a waste of time and money but oh well.
You guys are the best. Thanks for the advice.
Even with the length of time these have been on the market, with the rapid population growth of this area, we still feel good about it. The views from these new building sites will be incredible.
We'll see what happens. Wish us luck!