What should be our next step?

[A-GAME]

Hi everyone...Im going to share my family's story and hopefully some of you guys have some great ideas for what we should do next...My family currently owns almost $10 million worth of commercial property,all leased out and generating positive cashflow...We owe approximately $4.8 million to the bank...We owed $3 million not long ago but lost some money on a development due to bad timing and a death in the family...Now im wondering what are some options we have? Using the equity to acquire more commercial and residential real estate is where we will most likely aim next...Ive always loved real estate(being thats where we made the majority of our money originally) but im wondering what other ideas everyone has? Diversification is good thing so maybe you guys can point me in another direction?

 

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[A-GAME]

Dont all rush in and bombard me with ideas people...lol

 

[yveskleinsky]

When you say "family" who do you mean? ...How are you structuring your transactions? Do you need the family to agree with whatever decision you make? ...If you were to diversify, what would you do?

 

[SteveO]

There are not a lot of people on these forums that have a higher net worth due to real estate investments than you have. You should be giving out advice to others on here.

Any interest in telling us your story? It would help to know what you have and how you got there.

 

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[randallg99]

Hi everyone...Im going to share my family's story and hopefully some of you guys have some great ideas for what we should do next...My family currently owns almost $10 million worth of commercial property,all leased out and generating positive cashflow...We owe approximately $4.8 million to the bank...We owed $3 million not long ago but lost some money on a development due to bad timing and a death in the family...Now im wondering what are some options we have? Using the equity to acquire more commercial and residential real estate is where we will most likely aim next...Ive always loved real estate(being thats where we made the majority of our money originally) but im wondering what other ideas everyone has? Diversification is good thing so maybe you guys can point me in another direction?

1. I would assume you have already seeked advice from others in your field, or accountants, or attorneys. What ideas if any, have they proposed?
2. are these pieces of real estate rented to family businesses? or any relation to the tenant(s)?
3. what kind of real estate is it? is it office, retail...?
4. how much ownership/say do you have with the real estate operation?
5. what is your objective?

lots of options become available with 5 mil equity

 

[A-GAME]

When you say "family" who do you mean? ...How are you structuring your transactions? Do you need the family to agree with whatever decision you make? ...If you were to diversify, what would you do?

The property is held by a family trust so yes,i need the trust to agree with any moves i want to make...Im just brainstorming trying to think of ways to build on what we already have...And for me,real estate is something i feel comfortable with so moving into another area is just an idea at this point...

 

[A-GAME]

There are not a lot of people on these forums that have a higher net worth due to real estate investments than you have. You should be giving out advice to others on here.

Any interest in telling us your story? It would help to know what you have and how you got there.

I dont think im qualified to give advice to be honest,and my story is nothing special...My grandfather purchased alot of land along a dirt road 60 years ago and it eventually turned into a major highway...

 

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[A-GAME]

1. I would assume you have already seeked advice from others in your field, or accountants, or attorneys. What ideas if any, have they proposed?
2. are these pieces of real estate rented to family businesses? or any relation to the tenant(s)?
3. what kind of real estate is it? is it office, retail...?
4. how much ownership/say do you have with the real estate operation?
5. what is your objective?

lots of options become available with 5 mil equity

The trust has asked advice from accountants,attorney etc...But IMO they're not qualified to be giving advice to us...I doubt any of them own more than a few investment properties...Thats why i thought id come here and ask some people with similar circumstances...There is no relations to our tenants and like i said im just part of a big family,all ideas must go through the trust...My personal objective is to help the trust portfolio grow as much as possible...My family were trying to pay off the debt with the last development but IMO we shouldnt be trying to pay off the debt...The loans are being serviced so personally i think we should be using the remaining equity to fund more projects...The question is developments? Residential purchases? More commercial property? Business? Art lol?...Im really trying to get an idea so i can research further...

 

[A-GAME]

lots of options become available with 5 mil equity

This is why i wanted to ask some more experienced investors...

 

[MBinMT]

If your trustees have asked attorneys and lawyers advice, but don't like it, are all trustees in agreement that the advice is poor? Or is everone trying to put their own gameplan in place. There are so many questions you have to answer before anyone here could possible offer you a reasonable set of options.

 

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[SteveO]

Read some of my posts on apartments. I have a few articles written in the commercial real estate section. There are a lot of ways to learn how to proceed forward as well. Feel free to e-mail or pm me.

 

[A-GAME]

If your trustees have asked attorneys and lawyers advice, but don't like it, are all trustees in agreement that the advice is poor? Or is everone trying to put their own gameplan in place. There are so many questions you have to answer before anyone here could possible offer you a reasonable set of options.

No one is fighting and to be honest i dont know what they have asked the attorneys but i know that the attorneys are not investors themselves,not at this level anyways so why would i want to know their advice? Im the only one with a plan to move forward at the moment...In the main trustee's mind we should be trying to pay off the debt...Im my mind debt is our friend and the untapped equity should be used to further grow our portfolio and generate more cashflow...But if i can get an idea of some other investments we could be making to further grow our portfolio and cashflow,when i have researched a little more i will aproach the trust with my plan...In short,if the figures stack up then they will go ahead with any plan i put forward...

 

[A-GAME]

Read some of my posts on apartments. I have a few articles written in the commercial real estate section. There are a lot of ways to learn how to proceed forward as well. Feel free to e-mail or pm me.

Thanks SteveO...Will do.....

 

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[A-GAME]

Maybe i should change my question since some people are finding it hard to answer....

What would you do with $5 million in equity?

 

[MBinMT]

Forgive this blunt observation, but if your relationship with your commercial lenders is like most everyone elses, you are only going to be able to extract around half of the existing equity.

So, anyway, if you really want to pull that money and put it back in play to expand your investment base, why not move forward in the investment vehicle you already are riding? In a nutshell, buy raw land, develop, build (to suit or to sell). Since this is your bread and butter, your attorneys, accountants and trustees should all understand the market metrics of the business and it would be a much easier sell than taking off in a completely new (to you) direction.

If you want to dabble in another version of real estate, by all means investigate, but it is like everything else that has a learning curve, plunking down the whole egg basket on one deal is pretty scary. Put a little money in, learn a lot. Put a little more money in, learn some more. I know this sounds super conservative, but you mention $1.3 mil already bit the dust. Do you really want to repeat that lesson?

Good luck!

 

[A-GAME]

Forgive this blunt observation, but if your relationship with your commercial lenders is like most everyone elses, you are only going to be able to extract around half of the existing equity.

So, anyway, if you really want to pull that money and put it back in play to expand your investment base, why not move forward in the investment vehicle you already are riding? In a nutshell, buy raw land, develop, build (to suit or to sell). Since this is your bread and butter, your attorneys, accountants and trustees should all understand the market metrics of the business and it would be a much easier sell than taking off in a completely new (to you) direction.

If you want to dabble in another version of real estate, by all means investigate, but it is like everything else that has a learning curve, plunking down the whole egg basket on one deal is pretty scary. Put a little money in, learn a lot. Put a little more money in, learn some more. I know this sounds super conservative, but you mention $1.3 mil already bit the dust. Do you really want to repeat that lesson?

Good luck!

Thanks and thats really what i meant...I dont think using all of the equity available in one deal is a good didea...

 

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[A-GAME]

1) I would make sure that I had enough equity in each of my properties to ensure that each was positive cash-flow (and could remain positive cash-flow even in a 10-20% income downturn). This will protect you in the case of a market reversal, and ensure that you are never out-of-pocket on these properties;

2) I would put 2-4 months of expenses against all of your properties in a savings (money market, T-bill, or some other relatively liquid) account, as an emergency fund, just in case something unforseen happens;

3) I would refinance to tap the rest of the existing equity, and buy additional properties (or invest in other assets if you're more comfortable elsewhere). If you invest in additional property, I would ensure that you are covered with both #1, 2 above in any additional property.

This is just what I'd do...it may not be what others would do, as they may be more or less risk averse than I am...

Thanks JScott...Great advice there.....

 

[yveskleinsky]

The reason I was asking about how your family structures transactions is because if you need to get the approval of 10 people before anyone moves forward that can take longer than you may want to wait. If you do have several other people joined together, I suppose I would start off by getting everyone together and discussing future plans. If the most restrictive person restricts you (meaning that if you need all 10 of you to agree on how to proceed or no go- and you have one person who doesn't agree- then it doesn't really matter which direction the rest of you want to go!) Is there anyway you can seperate assets and you can move forward on your own? ...Is this even a direction you would consider going in?

...As for finding competent advisors, I would start off by asking the most competent advisors on this board for questions that they would recommend someone ask to gauge the level of advisor and go from there.

Good luck to you!

 

[andviv]

bump... I wonder what happened with A-Game and this interesting situation..

 

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[bizboy]

If I was you then I would stick with commercial property since that is the sector that you know and had success already.

 

[hatterasguy]

If you have good accountants and attorney's I would strongly recomend taking their advice. Did they like the last deal that cost you $1.3M?

Just because Gramp's brought some damn good property does not really mean much in regards to future deals. Except that you have some experiance managing them and some capital.

I'd stick with development, and do some small low margin but safe deals to get your feet wet. IMHO.

 

[Wimtbimtb]

Bumping hope to hear how this turned out.

 

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[A-GAME]

Thanks for the hope but things are still much the same.Probably a little worse given the current economic climate.Still holding onto all assets but yeh.Not much good news as far as progress is concerned.

 

[msa1]

I'm surprised to hear "diversifcation" from a person whose family has done so well in RE.

I look at it this way. You can invest in anything you want as long as you're educated in the area you want to invest in.

If it were me i'd probably stay with what has worked for you (RE).

After all Trump hasnt diversified and he's done okay for himself.