How would you buy this? Best creative purchase scenario wins!!

[David Dey]

@Terry Free has a post in another forum category that someone should come up with a real estate investing video game.  While I am no computer programmer, (I'm the guy who calls support and they ask if it's plugged in... And it isn't) I think a game that could get your creative juices flowing would be amazing.  Sooo...

Here's the game:  I'm going to give you a real life scenario from one of my deals and see how you would purchase it.  Best scenario as determined by votes wins the coveted Super-Duper Supreme Real Investor Grand Poobah award!! (I don't think BP has one of those yet but I think @Joshua Dorkin could get right on that!!  If you want I'll tell you at the end how I did buy it.  Very likely your scenario will be better, But just like the lottery the only chance at winning happens if you play.

Here we go:

Elderly lady has a 10 unit apt building listed in Central Florida for 350k in 04.  She and her Husband had owned it for years before he passed away and the property fell into disrepair.  There is a code enforcement fine on the property at $200 per day, currently at just over 300k.  The city wants to foreclose on their code lien and demolish the building in order to make a parking lot for their puclic gymnasium next door.  The only thing that is stopping them at the moment is that there is a small first mtg with Bank of America for 18k... Which just started a foreclosure process as it is about a year behind in payments.  

So what would you do?

P.S.  Because I want your best scenarios and as true to life as possible, if you have any questions before presenting your scenario, please feel free to ask.  I probably know the answer and if not, I will make it up.

... And GO!!!

[Ned Carey]

I seriously doubt the code enforcement lien is in second position. It is a municipal lien which in most areas puts it in front of the bank. 

You haven't said what the property is worth. What are current rents, what is a pro forma for a re-positioned building and what would the cost of renovations be.

I would offer a price that makes it a good deal now. I would then negotiate to pay a net to seller price so that I could then negotiate with the bank and the city. 

My guess is the city doesn't normally actually charge $200 a day (although it may be allowed by law) The law is very likely applied unevenly. Presuming that is true I would challenge the code violation bill on the fact that it was discrimination. Someone in the building or in title must be of some protected class. I would argue that the only reason you are charging $200 a day on this building when hundreds of buildings around the city are not charge that much is because of the discrimination.

I would also be lobbying city official and elected representatives, to sway them onto my side.

Along the way I would find the "Highest and best use' of the property, then figure the value of the property based on what it could be used for. The city cannot take it without compensating the owner. If the property is valuable enough and you can prove it, this may be leverage stop encourage the city to rethink their plan. My guess is they expect to get if for nothing via the trumped up bogus code fines. Once they realize they will have to come out of pocket for the real value they may reconsider.