Buy Share Equity Income – Part II

What should I do? What should I do? Investors will be commercial real estate and commercial real estate broker Charlie listed. Charlie, as a very serious and knowledgeable broker, concluded that he had a great property that needed a "hand" type of investor / landlord. Skills and driving people turn around the problem.

Charlie received several responses from his marketing efforts. After interviewing the prospect, Mr. Eager was chosen, and he suggested that he and Mr. Eager had met with Mr. Docile to see if a mutually agreed solution could be worked out.

Mr. Eager is an experienced owner / manager who has multiple income properties. He received enough income from other property to cover Mr. Docile's "food". One problem is that his cash resources are limited, and the cash flow of Docile property is negative, and everyone knows that getting new financing from institutional lenders is hard to repay Mr. Eager's loan.

Mr. Eager believes that the value of his property is $ 1.2 million, which may be 90% or higher occupancy rate; however, according to the current income and the current economic situation, of course, invalid. After considering the brainstorming, the broker Charlie proposed the following possible solution to give Mr. Docile his price and still be able to work for Mr. Eager.

1. Mr. Eager will lease the property by Mr. Docile for a period of five years. (If the length of time will violate the current terms of the loan, the lease period is 2 years or 3 years, there is a renewal of the option). Rental payments will be $ 4,800 per month. Mr. Eager will be responsible for tax, insurance and all other operating expenses.

2. Mr. Docile will grant Mr. Eager a five-year option to purchase the property for $ 1.2 million. The option cost is $ 10,000. In order to exercise the option, Mr. Eager will pay Mr. Docile $ 522,912 (today's equity) plus a 25% appreciation of $ 1.2 million over the future sale of the property by Mr. Eager.

* Note: The goal is to sell the property in the future when the market turns. To protect yourself, Mr. Eager should have the right to renew or extend the term of the option.

Advantages – Let's take a look at the benefits of the parties to the deal, Mr. Docile, the owner; potential buyer Mr. Eager Do not forget the broker Charlie. He may be the most important factor in the deal together.

1) Benefits to the owner of Mr. Docile:

A – He solved his negative cash flow problem.

B – He reserves all taxes on the property.

C – He gains the full value plus the property value of the equity appreciation.

D – He did not receive the taxable monthly interest, but recovered from the future


E – He does not have to sell in a depressed market, he will not receive a good price.

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New bank loans.

B – With his expertise, he can get a vacancy and get a positive cash flow.

C – If he exercises the option and resells the property after 5 years, he will receive $ 50,647 in

minus the existing principal of the loan plus the appreciation up to 120 75% of the dollar.

D – If for some reason he can not change the property, he can walk away. If that happens

He will lose $ 10,000 in options – but it is best to lose a finger

all of you.

3) Benefits of Broker Charlie:

A – $ 9,600 in leasing commission (two months of rent).

B – When Mr. Eager sells the property, he gets 5% of the selling price. The seller and the buyer

pay half of each.

These posts are the author's advice, not to provide legal, accounting or investment advice. If such advice is desired or desired, consideration should be given to the services of the professional.