Thank you for your insight and good information. I will pass this along to my friend. He was going to move forward with the appraisal first, but this does make more sense.
I appreciate your time - even after pre-dated post. Do yo work in Commercial Real Estate? Residential Real Estate?
My first suggestion might be to contact local (within a reasonable driving distance) franchisees of such companies (fast food, etc) to see if they are interested in taking space in your proposed project. You should have some basic info already done like population figures, traffic, absorption study, etc.
Also, see if the franchises in your town are doing well. If they are just getting by, I cannot imagine anyone wanting to go in there. By doing a direct approach you may find a franchisee wanting to expand. Also, keep in mind that in many locations now, they will put multiple franchises under one roof, such as a KFC, Taco Bell and Pizza Hut for example.
Find something that you think your town could use, and approach the nearest store of that type in the nearest town (Payless shoes, mailboxes etc, whatever the case may be).
Doing this kind of homework will let you know ahead of time if you have a shot at a successful project.
Another option is to do a JV with a builder/developer. A common practice here in the Dominican Republic is the person with the land will put it up as his share of the deal, and a builder will get the building put up. The partners split the units, and they have the option to either sell the units, or keep them for rentals. If a realtor put the deal together, they are also often paid their commission in units. This keeps cash outlay to a minimum.
Not knowing the details of his current loan, is it something that has to be paid off with a balloon?
Is he able to get a little creative, and basically sell these properties with small cash down and "tote the note", basically doing a wrap? Even if he does not get out of it with any profit, better than taking a loss. Not sure if it is possible for him, just a thought.
Biggest issues I can think of offhand would be first finding out what the market of the property will be and what you can expect for cashflow, so a proforma would be a good place to start.
Next, find what it would cost to complete the property, and make sure you have enough to cover that, including any contingencies. Then, make sure that with what you pay the bank and what you pay to complete the project, you are still getting a good deal, and that it will cashflow, and that there is a need for apartments in that area.
Finally, make sure that there are no liens left lying around. Title is going to be the biggest issue. If the contractor is going under, he may not have paid everyone their money, and you could potentiall have 50 mechanics liens on the property.
I am sure there is more to look out for, but these were the immediate things that popped into my head.
PM me, I might be able to help you a little more.
Joe -
Thank you for your insight and good information. I will pass this along to my friend. He was going to move forward with the appraisal first, but this does make more sense.
I appreciate your time - even after pre-dated post. Do yo work in Commercial Real Estate? Residential Real Estate?
Best!
LouRob
My first suggestion might be to contact local (within a reasonable driving distance) franchisees of such companies (fast food, etc) to see if they are interested in taking space in your proposed project. You should have some basic info already done like population figures, traffic, absorption study, etc.
Also, see if the franchises in your town are doing well. If they are just getting by, I cannot imagine anyone wanting to go in there. By doing a direct approach you may find a franchisee wanting to expand. Also, keep in mind that in many locations now, they will put multiple franchises under one roof, such as a KFC, Taco Bell and Pizza Hut for example.
Find something that you think your town could use, and approach the nearest store of that type in the nearest town (Payless shoes, mailboxes etc, whatever the case may be).
Doing this kind of homework will let you know ahead of time if you have a shot at a successful project.
What about national tenants. How do you reach them? Do they typically build the building themselves?
Another option is to do a JV with a builder/developer. A common practice here in the Dominican Republic is the person with the land will put it up as his share of the deal, and a builder will get the building put up. The partners split the units, and they have the option to either sell the units, or keep them for rentals. If a realtor put the deal together, they are also often paid their commission in units. This keeps cash outlay to a minimum.
where are the houses? In p cola?
Milton
Not knowing the details of his current loan, is it something that has to be paid off with a balloon?
Is he able to get a little creative, and basically sell these properties with small cash down and "tote the note", basically doing a wrap? Even if he does not get out of it with any profit, better than taking a loss. Not sure if it is possible for him, just a thought.
That would be an ok idea if he could afford to refi out of his preconstruction loan.
Biggest issues I can think of offhand would be first finding out what the market of the property will be and what you can expect for cashflow, so a proforma would be a good place to start.
Next, find what it would cost to complete the property, and make sure you have enough to cover that, including any contingencies. Then, make sure that with what you pay the bank and what you pay to complete the project, you are still getting a good deal, and that it will cashflow, and that there is a need for apartments in that area.
Finally, make sure that there are no liens left lying around. Title is going to be the biggest issue. If the contractor is going under, he may not have paid everyone their money, and you could potentiall have 50 mechanics liens on the property.
I am sure there is more to look out for, but these were the immediate things that popped into my head.