Sale/leaseback Of Group Homes
I think I understand that the purpose of this sort of transaction is to take equity held in real estate and turn it into cash.
Are there other advantages for the seller?
A company (w/ a State contract) that owns and operates several group homes is look to do a sale/leaseback of there homes, which are 1-4 unit residential properties.
What Term on the lease?
What form of guarantee would you landlords look for?
I was thinking on tying it to the payment from the State somehow if I could. So the State contract is guaranteeing the lease.
What other concerns do people have?
Carrying a higher liability limit I thought would be prudent just because of more people in the property, and their troubled past.
[ Edited by cjmazur on Date 12/02/2007 ]
Dreamer yes, Miracle worker NOT!
My main concern on the financials, is what happens when their lease runs out?
I guess I could just lease to the next winning bidder.
The only thing is, the government or state agency wont do a contract with the homeowner. They will give a contract to a business entity that goes thru the paperwork and inspections to get the home approved for there clients. Once the business moves or closes down the home can only be used as a regular home, unless you have another group home come in, or if you get licensed as a provider. I owned 2 personal care homes or group homes in Ga., 1 of them was another personal care home owner who wanted to get out of the business. It is a good market to be in. I actually consult for individuals that want to get in the business.
Well the month to month income is tricky. I have a building with $15,000 a month in month-to-month leases. Appraisers routinely want to discount this to zero because there is no long-term guarantee. But I show my last 12 years of income, that even though there is turnover the vacant spaces re-rent quickly, and most of the time I am able to convince them that the income is legitimate and should be counted. (When I cannot I find another lender who will use a more reasonable appraiser.)
So I would start by looking at this month to month income and seeing how stable it has been over a long period of time and I would attempt to understand the dynamics of the market for antenna space to determine how it is likely to go in the future.
Turned out when I dug deeper, the RF equipment need constant maintenance, and it was 2 brothers fighting for the property, and this was the courts resolution.
Just being a little dense, so bear with me.
You say the land is leased from the USA and has a couple of RF towers which are also leased.
What are you buying? The leases for the land the towers sit on from the USA, or are you buying the RF towers subject to the existing ground lease with the USA and taking over the leases on the towers themselves?
Or, will you be in a sandwich lease position with the towers, subletting from the brothers and taking the landlord position for the tower leases?