S.E.C. Real Estate Observer

• Tweet

• Tweet

Can you “create” a transaction when one does not readily appear possible? Here are a few thoughts to contemplate.

At marketing sessions, pay particular attention to what the attendee’s clients are seeking. Often there is a common pattern, such as a dearth of cash looking for net leased properties. The buyers have determined the quantity, quality and durability of the income stream desired with, for example, returns of 7.5% or more, national tenants and longer term leases. You may not have that type of product available, and, absent listing it, here’s how you can come to the next marketing meetings having created the product that may fill the bill.

Analyze the benefits being sought, a definable cash flow, and surety of payments, continuing for a defined period. Some of your clients may have lazy equity, and while they do not want a sale or exchange, may be open to acquiring more property, using equity to do so. For instance, your client may have an income property worth $575,000 with a $300,000 loan. The tenant may not be national, but has been there for a number of years, and your client agrees to a guarantee.

There are many ways to satisfy your client’s needs and bring the marketplace what it is seeking:

• Create a second mortgage for $100,000 at terms meeting the requirements, i.e. 8%, 12 years, or,
• Create a land lease subordinated to the 1st loan with annual payments of around $7,500. If you structure a 55 year land lease without any escalators the face amount over the term is $412,500, a number that catches one’s attention! Of course, you insert an option to reacquire the land after a time certain. The cash your client is offered can be used to acquire property in a three-way transaction. Be sure any existing or created loan documents allow for these changes.

There are as many ways to create a transaction as your creative mind can conjure up. Being alive, awake, and “wide open” to creative thought will increase your opportunities for success.