Re: Ray's insights on these 2 choices

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Posted by Mike S. on May 25, 2009 at 09:34:56:

In Reply to: Re: Ray's insights on these 2 choices posted by ray@lcorn on May 25, 2009 at 08:18:21:

Thanks for your response Ray,
The NNN deal is brand new, they get their C.O. this week, so this is a full 10 year lease with 2 five year options. The lease is with oorporate. (the franshisor) The Franshisee pays corporate each month and then corporate pays me. The weak financials are with corporate, which being just a franchisor and not a operator, makes me unsure how strong they need to be. The demographics and traffic counts of the area are very strong. (I can't think of an area in Salt Lake City that would be any stronger) The Purchase price is 1,620,000 of which 412,000 is land value. The building is 3750 sq ft, so about $325 psf. Nice building, rock facade etc, however I'm not sure what replacement costs would be. (guessing $150 psf)

The 800K represents the majority of my investing capital. I'm 50 but am still looking more for growth as I don't depend on my investment income to support my family. If I do the developement deal we've agreed that I'd come in for only 500K and I'd take the capital gains hit on the other 300K.

With the developement deal we'd subdivide off 6 acres of the 17 acres which I'd have title to. In 2 years I could then trade into the partnership or have my 500K returned to me if I'm unhappy about how the project has progressed. This facilitates my 1031 as well as offers me some security and a small return . The land in St George Ut has been rezoned to build up to 4 stories high so the value of the 6 acres would be secure.

Thanks again Ray for looking at these 2 options.

Mike

P.S. My accountant has told me to be cautious about purchasing a property and then immediatly refinancing as the IRS would consider this a taxable event if audited.

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