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To help train your brain to structure creative real estate transactions, let me know how you would put this opportunity together.
Yesterday I met with a VERY motivated seller in Panama. They have two houses next to each other that they want to sell. One house is complete. The other house is being lived in but still needs a lot of work to finish. All the materials are there to complete the house. Mom & Dad are living in one house. Their adult son and his family are living in the partially complete house. There is room to build a 3rd house on the property. It is about $30sf to build a house in Panama. They are asking $240,000 for the fully furnished houses. Once complete, I estimate the two houses would be worth $300,000 to $320,000.
They also have a 2015 and a 2016 car that they will sell for $7,000 each. A pizza business with 2 locations for sale for $35,000 and a pizza delivery truck for $3500.
They are moving to Italy on Saturday. Their Dad is very ill and they want to get back to Italy ( their home country) as fast as possible.
They begged me to just make any offer.
How would you structure this transaction?
Repair cost to complete house, labor only, would be about $5,000 ( cheaper in Panama) and would take about 4 weeks.
By the way, both houses have mountain views. One house ( partially complete) also have a nice ocean view.
They really do not need cash now. But I’m sure they would like to get something. They have a home in Italy to move back to.
Option 1: Cash offer of $160,000 for the houses + $40,000 for car, business, delivery truck. Total $200,000 CASH NOW. Find a buyer for business and VRBO the properties. .
Option 2: Lease purchase. $10,000 now or something close (no more than $35k structured to buy out the business and vehicles). $500-1000/mo then $200k in 1-5 years.
Much of this will depend on knowing what they really need/want. And all this is said without knowing what nightly/weekly VRBO rates are in Panama.
I think I would leave the pizza shops and pizza truck out of the deal.
I’ll give them the 240k on a 10 yr seller financed deal. 5% dn since there is some work that still needs to be done on one of the houses. They are not money hunger, so a steady cash flow would be great for them. I’ll also, give them 5% interest.Can you do an option for the 2 cars and another option for the business? That way you can find very different buyers for each of these. For the houses, I would offer them $10,000 up front for the houses and then perhaps $5000 chunks every 6 months until you reach a final paid price (like maybe $100,000)? Since they dont really need money right now, this is a nice way to give them something now and take advantage of a no interest loan that only has to be paid twice a year.
First of all are the pizza places profitable? Secondly, how much net do they do a year? I would buy them separately if one was more profitable than the other or offer less by doing this. Take the net profit for one (or two if you want to ) and offer them that for the sales price. Plus get an independent appraisal of the equipment and add that on.
Check out the lease to see how much time is left on that and make sure that it’s assumable and that you can get an option to renew or extend.
Get the tax returns for the last 3 years to figure out the net and if it’s going down that’s one thing if it’s going up that’s another. A good deal or a bad deal Goodwill or bad will.First of all are the pizza places profitable? Secondly, how much net do they do yearly?Take the net profit for one (or two if you want to ) and offer them that for the sales price. Plus get an independent appraisal of the equipment and add that on.
Check out the lease to see how much time is left on that and make sure that it’s assumable and that you can get an option to renew or extend.
Get the tax returns for the last 3 years to figure out the net.Are the two Pizza locations owned free and clear?
If so, maybe you’d buy the real estate on owner financing using soft terms based upon lease income. Then you lease the locations out to a new pizza operator. Sell the equipment to the tenant for either cash or in an owner financing agreement. Such a structure should allow you to own the property risk-free at a profit and stay out of the headache of operating a pizza company.
For the houses, master lease them on a performance lease with a 10 year option to buy at some strike price around the $240k range. The lease is based on the whole property of which there are only two houses available for rent. Do the work to fix the two houses ($5k) and build the 3rd house and put it into service. Try to get lease payments to contribute to the option price pay down. After some time, you can find a buyer for the property and exercise your option at the same time. Your profit should be pretty nice on that deal; you’ll get risk-free cash flow, equity pay down, and profit on the way out. Some of your cashflow may get washed out in the build of the 3rd house, but seems worth it overall.
Best I could do off the top of my head…
Here’s the status of the package deal in Panama. I sent my contractor over to the house to give me an estimate. As I thought, it will take about $10,000 to $15,000 to finish out the houses and get them looking perfect. (it is cheaper to get work done in Panama).
But I was still reluctant to do the deal. The properties are in a great location and could be a big money maker but I don’t want to stretch myself too thin so I passed.
I just finished a kitchen remodel and office addition to my house. I’ve been dealing with contractors every day for more than a month.
The first week in June, I start the renovations on the smoking hot deal I bought last month (closing from Hell), It’s worth about $145,000 and I bought it for $55,000. It needs very little work to get ready to resell.
And I just closed on 10 acres next to the Pacific Ocean which I plan to subdivide then resell the lots. This will be an easy project.
When I told the sellers of the package deal that I would pass, they dropped the price an additional $100,000 and said they would do seller financing. But even with those great numbers, I’m going to pass because it will take up too much of my time.
When I live in Texas, I’d do 3-4-5 deals a month. I was constantly busy.
When I moved to Panama, my plan was to relax more and work less. I still do a PanamaRelocationTours.com 1 week a month. But was to keep the rest of the time freed up to work in my greenhouse, flower gardens and coffee farm.
A few good deals a year in Panama are good enough.
I also passed on 2 master leases in Panama last week. They are in a good location and the cash flow would be about $250 per month per unit but I don’t like the layout or the set up at the condos.
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