Thinking outside the box

[Derek Bell]

I have a dilemma. I have a 14 acre property. I bought it a few years ago. Two buildings came along with the sale. The buildings take up about 3 acres, leaving me about 11 acres. I am building 2 additional buildings on the spare land. Currently have a note on everything with a killer 2.8% rate. Loan will balloon in about 3 years. If I get a construction loan to build my two buildings the old note will have to be paid off leaving me with a higher rate. I have a few scenarios I see:

1) just chalk it up to the cost of doing business

2) there are three parcels. Both current buildings are parceled off with the third parcel being the remaining land. Sell just the buildings and keep the land. I have added so much to the annual NOI that I could probably sell the buildings at a good price so that I get the land for almost nothing.

Any further thoughts or suggestions would be appreciated. 

[Ronald Rohde]

Borrowing a small amount at a low rate is not as good as owning land free and clear, IMO. If you have a use for the new development, sell and keep going.

Otherwise, approach the existing note holder about adding a second from them for the construction. that gives you a total blended rate and you own both sets of land