Considerations for a cash purchase of a property to hold

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Hi all, I'm just looking for feedback on a deal that my wife and I are considering since we're not professional commercial real estate investors. Thanks for any comments.

We live in a small town not far from a very popular tourist area where river-based activities are common - tubing, kayaking, canoeing, fishing etc. For various reasons the section of the river in our county is very under-utilized - there are tubing rentals and kayak outfitters and so on on every other section, but none near our area. I think the main reason has been a lack of good river access points, there are only a couple in the county, and there's a very long stretch with no good place to get in or out of the river at all.

So at the bottom or our hill there's been property for sale for a while, it used to be a landscaping business or some such but it's been vacant for years. It's about four acres all along the river, including a 1,200 square foot building with one large room, a small lobby, a small office and a small bathroom. Building looks to be in OK shape, but there's no capacity to expand the septic system beyond the one bathroom, we're told. It's in a flood plain, but there's no history of flooding and the building sits very high up from the river. It doesn't have a river access point now but we're told it could be put in easily.

Here are the two main reasons we're interested in the property:

  • Location for a river-based business. It really seems perfect for a tubing/kayak rental sort of business (my wife and I paddle quite a bit). It's right on the river and would have its own easy access. This fall the county will put a new public access in upstream, and because of the particular course of this river it would take literally three minutes to shuttle customers to that put-in, from which they'd have a very scenic four-mile drift downstream and take out right at their cars at our place. That's a lot easier than most tube rental places, which may have to shuttle to a nearby put-in and then do an even longer shuttle from a take-out. Downstream from this  location (too far to tube, but a good kayaking day trip) is a huge new brewery that's a tourist destination in itself, and this brewery has plans to put river access and paddling facilities on their property at some point in the future. So this would be a good spot for people to put in if they plan to paddle down to the brewery in the future.
  • Future bike path. A number of local governments and community groups have been pushing a new "rails-to-trails" bike path for an unused rail line. This property is literally right on that rail line - the tracks on one side and the river on the other. So if that comes to pass, a bike rental/service sort of shop would be a natural. I think the rail trail is more likely to happen than not and it should have a very beneficial impact on the value of this property, but it could be ten years away. Much less likely but still possible would be a recommissioning of the rail line for an industrial use, in which case I would think the value of this property would plummet.

The seller has dropped the price several times down to around $150k, having bought it for $170k in 2007, and the tax value is only $68k (about half and half land and building). The hint from the seller's agent is that they're close to their bottom limit because they have a mortgage and don't have money to bring to the table. Our agent can't find any record of a mortgage, so it must be private money and we don't know how  much they owe.

We don't much care for debt but my wife and I have enough cash to put together a credible offer. What I'd appreciate feedback on is:

  • Is it dumb to use cash for some reason? We have no kids, live cheaply, have good monthly income (she'd keep her job, I'd mainly run the business) and lots of residential real estate equity. It would take most of our readily available cash to secure the property, but we wouldn't be tapping our retirement accounts or anything. We'd considering selling a residential property for more cash to invest in the business, though as far as I can tell with a building already there and paid for, doing a tube rental business shouldn't require all that much.
  • Seasonality? The season for a business like this would probably be April to September, which is great for us since we don't like hanging around here when it snows anyway. Since the building would be paid for I guess it wouldn't be the end of the world for it to be idle off-season, but it'd be great to come up with some way it might generate income in the winter.
  • Valuing for complete failure? I'd like it to be the case that, even if we decide we hate running an outfitter ourselves, nobody wants to paddle around here anyway and no bike path is ever built that we could at least still generate some income and see some long-term appreciation. What are some considerations or calculations I can make to see if that's a decent possibility?

Sorry for the long post, but if you've made it this far I appreciate any comments. Thanks!

I think that's right, thanks Joel. Actually I'm wondering if that's one of the reasons the property has been on the market for so long, the insurance issue related to the flood plain for anybody who would have to finance. If we pay cash I'd think about foregoing flood insurance - the odds of a flood reaching the building look very low, and if the contents are inner tubes and kayaks there probably wouldn't be much risk, I think.