S.E.C. Real Estate Observer

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Formula: Add Cash to Land and for Paper

If you own a piece of land and would like to receive the highest value, but you are currently unable to sell it for that value, consider adding some cash to your land and exchanging it for some existing or to be created notes.

Example: I once needed cash to pay off an existing institutional mortgage during a time when lenders were not making loans on the kind of property that I owned.

My friend Gary owned some commercial land in Michigan that he was unable to sell due to a recession in the state. Together we had two problems that needed solving.

Gary exchanged me $150,000 of his commercial lots in Michigan plus $150,000 in cash for a total of $300,000 in notes. The notes were secured by two other parcels of land in Michigan and the property I own in another state that I had been unable to finance. The notes were at 10% interest rate with monthly payments. The balances on the notes were due and payable in five years.

The advantage of this transaction to Gary was that he was able to sell land for which there was no conventional market at the time. The advantage to me was that I obtained long-term financing on a property for which there is no conventional long-term financing available.

$150,000 Land
+ = $300,000 Notes and Deeds of Trust
$150,000 Cash

Of course, you could substitute almost any property for the land in this formula. The land is simply the “vehicle” for the transaction. The goal is that two people solve their individual problem by working together.

Charles E. Sutherland, S.E.C., is a commercial real estate investor and developer based in Dallas, Texas. In the real estate business since 1971, Mr. Sutherland has been involved in the successful development of single and multi-family, commercial, retail, industrial, hotel and mini-storage projects.

This article may not be reproduced, or used for any purpose without prior written authorization by the author, Charles E. Sutherland, S.E.C., charlesesutherland@gmail.com.