Purchasing a building

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Purchasing a building

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dblclik

posts: 12

Aug 30, 2008 4:21 PM ET Quote Report Abuse

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Hi,

I recetnly got my 90 year old grandfather to agree to sell me his 30,000sq foot building and a few land lots. My goal is to build a 100,000 sq foot retail store.

He is willing to sell me it to me a much lower cost than what it is appraised for. I am projecting that I am going to need to make 600,000 in improvemetns and updates, (Geothermal, solar, possible wind energry solutions) and retail build out.

1.) Is there a way to benfit from the hidden equity being that he is sellign it to me $100,000`s cheaper than it could bring on the open market? I could probably turn around and sell the building however my dream is to build my business it.

2.) What if he transfered it into my name and I then just borrowed against the value of the building and pay`ed him? If he transfer it wouldn`t I Get the same PROPERTY TAX rate that he got 50+ years ago? LEGAL? Then used the rest of the money to SBA the improvements? or refinanced it somehow ? (there has to be a famiy advantage hidden in here someplace)

3.) I am also planning on renting part of the building out to a church for Sunday school program. Monsanto is currently renting the building and the land and lots. They are to be done in a month however I called them and they told me that they would not be done for possible another 6 months. I could have them also rent the building and pay the morgage payments while I have it reconstucted.

4.) I should also be able to use TIFF money to decrease the rebuilding costs. I am not sure exactly what I have to do or how much money TIFF should be able to provide.

On the other side I am looking at taking a sba 504c loan package? Does anyone have experiance in taking on of these or know risks of taking a loan.

Any other suggestions on how to properly get things done or things i should be thinking about purchasing this property and making a good choice.

robertj

posts: 1458

Aug 31, 2008 1:00 PM ET Quote Report Abuse

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dblclick,

I`d suggest that before you proceed with the initial transaction - consider the tax implications of each option as well as the funding scenarios.

What State is this property in?

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posts: 382

Aug 31, 2008 3:29 PM ET Quote Report Abuse

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First, I assume you mean 100,000 sf of retail space, not a 100,000 sf retail store. A single store that size would have to be a BJ`s, Costco, or such, and if one of those retailers were interested in the site, you`d have a deal pending.

If in fact the empty lots are in a good area, and you can get enough interest from retailers, then surely, regardless of the tax implications, you could pay your gramps out of the cash flow from the center.

And, your angst over the tax implications is unwarranted if the building is leased. Taxes are passed through to tenants as part of their CAM costs and shouldn`t really hurt your cash flow.

Last, your desire to implement some "green" into your projects is idealistic, but may not be realistic. Retrofitting to "green" is difficult at best, and in most cases has proven to be far from cost effective. New green retail is being done, but mostly by those retailers looking for some marketing edge. It has not become the norm as yet.

dblclik

posts: 12

Sep 01, 2008 1:54 AM ET Quote Report Abuse

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Yes I am purchasing the property and the land to make it a 100,000 sf store. I am also developing my own retail model to use that space and open my own store in that space. I am going to have my new startup retail business lease back the building space from myself. To help my startup business I was planning on leasing parts of the building out I don`t need.

1.) to a church - 5,000 sq ft.

2.) to a non profit - (I was told I could get good RUAL ECONMIC GRANTS)

3.) rent out the rest that my business doesn`t need to monsanto.

The entire building and land is not being used by monsanto they only use most of the land and some of the building. The rest of it is all empty. Monsanto won`t care as long as there stuff is not tampered with. There lease is up next month. After talking with monsanto they want to lease for another 6 months until there new building is complete. I don`t suspect any problems with monsanto.

The entire green process is simple when you have to start from scratch. Most retailers wouldn`t find it cost effective in converting because of costs. HOWEVER since I have to design and install everything from scratch GOING GREEN MAKES $$$ SENSE. Once the green investment is paid off It should technically be money in the bank and what happens to my bank account when I have the building and land and green materials paid off 100%?

I am in a remote rual area. I`m located 30 mins for 3 diffrent major cities in all diffrent directions. By building a stand alone retail store with alot of unique qualites I am hoping to attract serious homeowners. Locating my business in the center should give me a competitive advantage over many retailers.

However there has to be a better method to purchasing the land and the building. Are there any implications by having my granfather turn the title over to my name and then extracting the equity out of the land and property to pay him? When I extract out the owned equity wouldn`t i also be able to extract out more equity to take my SBA loan for my retail startup business at the same time? NO PERSONAL MONEY OUT OF MY POCKET?

The building and land as it is now was supposedly if I am correct. APPRAISED at 900,000. He is willing to sell it to me for 350,000. I will probably have it appraised again to double check.

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