Should I Buy This Property or Take the Cash? | FerrariChat
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Should I Buy This Property or Take the Cash?

Discussion in 'Other Off Topic Forum' started by Shark01, Jul 14, 2007.

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  1. Shark01

    Shark01 F1 Veteran

    Jun 25, 2005
    6,529
    #1 Shark01, Jul 14, 2007
    My mother has owned 900 ft of commercial real estate on Panama City Beach for the past 20 years. She wants to sell out now. The store is in a shopping area of a condominium complex. There has been a nail shop in the location for 11 years, doing OK I guess. An appraisal came back last week for $125,000. Since I was in business with my late Father for several years, she has offered me the property for $50,000. Or I can take 1/3 of the sales price in cash after taxes, about $30,000.

    The big drawback is that the rent is below market value, and I’m not sure the nail shop could afford to pay much more. So the rental income pretty much equals the condo fees plus maintenance expenses.

    So the money to be made on the property would center around some tax benefits of the building depreciation and fees/maintenance paid and whatever appreciation it collects.

    The money used would be my Ferrari fund (gulp), and the idea would be to hold the property for 5 years and sell before I was too old to appreciate a Ferrari.


    So there it is, take $30k now or buy and hold the property?
     
  2. Glassman

    Glassman F1 World Champ
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    #2 Glassman, Jul 14, 2007
    Buying the property gives you an instant 75k in equity. That beats the crap out of 30k to spend. For the record, you never get too old to appreciate a Ferrari.
     
  3. fastliz

    fastliz Formula Junior

    Jun 22, 2005
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    #3 fastliz, Jul 14, 2007
    My thoughts exactly. No such thing as too old to appreciate a Ferrari. :) I've been waiting 30 years to get mine! Not there yet.. but getting closer!

    Mike
     
  4. 62 250 GTO

    62 250 GTO F1 Veteran

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    #4 62 250 GTO, Jul 14, 2007
    Property.

    30k can't buy much in the way of land or time when it comes to business.
     
  5. djui5

    djui5 F1 Veteran

    Aug 9, 2006
    5,418
    Phoenix, Arizona
    #5 djui5, Jul 14, 2007
    Buy! PC won't be depreciating in value anytime soon either, so the value should go up eventually. Also, if you need to, maybe find some new tennants that can afford a rate increase to cover things and put some $$ in your pocket every month. It'll be worth it in the long run.
     
  6. TrentS

    TrentS Formula Junior

    Nov 22, 2005
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    #6 TrentS, Jul 15, 2007
    What am I missing here? Sounds like a no-brainer to me... Take the property and find a tenant who can pay fair market value!
     
  7. PAP 348

    PAP 348 Ten Time F1 World Champ
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    Dec 10, 2005
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    #7 PAP 348, Jul 15, 2007
    Buy the property man. :):)
    Also.......it is NEVER too late to appreciate a Ferrari. A Ferrari will put a smile on anyones face, regardless of age. :):)
     
  8. Shark01

    Shark01 F1 Veteran

    Jun 25, 2005
    6,529
    #8 Shark01, Jul 15, 2007
    The difference between what they are paying now and fair market value is only $300/mth.......so that wouldn't make up the difference between a 360 and 430...LOL

    The other consideration there is since its a beach town, it kind of shuts down after Labor Day, so finding a new tennant for the next 9 months is remote at best. Plus she has been a good tennant for 11 years. I would raise the rent say $100 per month.

    It isn't a no-brainer, I'm being offered $30k in cash.....for nothing.....enough to top off the car fund and buy a 355 cab right now.........or do I take the risk?
     
  9. dm_n_stuff

    dm_n_stuff Four Time F1 World Champ
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    #9 dm_n_stuff, Jul 15, 2007
    Buy the property.

    Hold it a year.

    Flip it. Maybe even to the folks in the nail shop.

    Pay the cap gains on the $150K+ it sells for and pocket $130K+, you net $80 profit on your $50K investment in 12 months. And that $80K will almost get you a 360 by this time next year.

    Even if you only sell it for the $125K it appraised for now you'll make $55K. And my experience with appraisals is they generally land under real market value.

    DM
     
  10. 62 250 GTO

    62 250 GTO F1 Veteran

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    #10 62 250 GTO, Jul 15, 2007
    The other thing with appraisals is it's a starting off point. Unless you're desperate you'll eventually find a buyer that will give you more and that goes for anything valuable.
     
  11. darth550

    darth550 Six Time F1 World Champ
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    #11 darth550, Jul 15, 2007
    Yeah....
     
  12. Asian1118

    Asian1118 F1 Rookie

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    #12 Asian1118, Jul 15, 2007
    If you have a savings fund for a ferrari you must already doing ok for yourself, so even though 30k is a significant amount of cash buying into 75k of equity right away and holding it for awhile will pay off. I would say unless you really need the 30k now (for something other than the 355) buy. Wait a bit and cash in.
     
  13. Shark01

    Shark01 F1 Veteran

    Jun 25, 2005
    6,529
    #13 Shark01, Jul 15, 2007

    No, I told my Mom I would hold it for 5 years....otherwise she would sell it now and I'd get the $30k.......thats the price I'd have to pay to get it at a discount. She is real hyped up about the airport being built on the beach in 2010.....thats why the 5 year hold....

    I'm leaning towards buying the property.........until I see a thread with a picture of a 355 on it.....damn.....
     
  14. Devilsolsi

    Devilsolsi F1 Veteran
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    #14 Devilsolsi, Jul 16, 2007
    I think that just sealed the deal. Congrats on the property you are about to buy!
     
  15. Shark01

    Shark01 F1 Veteran

    Jun 25, 2005
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    #15 Shark01, Jul 18, 2007
    As an update, the 5 year cash flow favors building purchase by $35,000. So I'm negotiating a higher rental rate (increase $100/mth) with the tennant. If they accept, I'll procede with the purchase. If they decide to move out, we'll put it up for sale and I'll see $25-30k after taxes.
     
  16. mike

    mike Formula Junior

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    #16 mike, Jul 18, 2007
    get the property...it's all about leverage! for 50k you control 125k.
    I wouldn't drive tennants out, especially if the're that LOYAL...so maybe do some rate increases but even if you don't you have other benefits!
     
  17. James_Woods

    James_Woods F1 World Champ

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    #17 James_Woods, Jul 18, 2007
    Right - and if you are at all a kind of handyman, do a little sweat equity as an enhancement to your future investment. This will please your tenant and your neighbors as well.

    I had the opposite situation years ago, my Grandfather left me a small industrial park when I was still a minor, with my mother having control. My dad forced her to sell it for only about $175,000 even though it was bringing in decent rents and without debt.

    It would be worth enough now to buy an ENZO, besides the yearly income all this time.
     
  18. BLUROAD

    BLUROAD F1 Veteran

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    #18 BLUROAD, Jul 18, 2007
    Plus 1...
     
  19. Shark01

    Shark01 F1 Veteran

    Jun 25, 2005
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    #19 Shark01, Jul 18, 2007
    I live 1000 miles away from the place........thats why a long-term stable tennant is a requirement.......or I'll grab the cash.
     
  20. Whisky

    Whisky Three Time F1 World Champ
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    #20 Whisky, Jul 18, 2007
    Are there any other people (businesses) that are clamoring for space in that area ? After you figure that out, then think about raising the rent. What is the competition in the area for space like that ? Anyone else interested in it (to rent it) ?
     
  21. mike

    mike Formula Junior

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    #21 mike, Jul 19, 2007
    you can have a management company handle this stuff too.. their expenses are tax deductible!.. plus other expenses.. Great tax benefits
     
  22. VK430gt

    VK430gt Formula 3
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    #22 VK430gt, Jul 19, 2007
    I know im to young for this advice but from my speculation and observations from past experiences.....if its panama city take the property, and flip it just like what dm_n_stuff said. panama city is doing well and is peacfully booming as we speak.
     

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