All Forum Posts by: Jarred Sleeth

@Daniel Castiblanco

Welcome to BP! Lots of good links here for you to read up on, and almost endless knowledge to drink up. I'm not far from you if you need someone to reach out to.

Good luck!

@Shane H.

This gentleman seems to be very inspirational! You're fortunate to have someone like that in your life. I hope you continue to meet with him.

I like your idea about trying to work the land into the deal. In fact, I think I would definitely like to speak with them about it. The sellers said they tried to buy it but they "weren't ready to sell yet." Maybe this means they could be in the future. All speculation of course, but if I'm going to hold the deal for 25 years, there could be a time to acquire the land somewhere along the line.

Thanks for all the comments, this is a pretty great discussion on something not often talked about on here. 

@Nick L.

This is very helpful. A few questions. When you say after leverage, what do you mean? I understand leverage but I'm not sure I followed this in your scenario. Also, could you expound on your comment about discount rate and reinvesting profits? What would this look like? Thirdly, since you seem very knowledgeable in this area, can you come up with a few examples of how the financing could work if I were to purchase the deal? 

This is good stuff. A lot of learning happening here.

Alex,

Welcome to BP! What you'll absolutely need to do is consult a real estate attorney and a CPA. Every persons situation will be different and there are plenty of ways to go about this. In order to determine what's best for you and your goals, you should consult the experts in your circle. 

If you need help finding qualified professionals in your area, I would try to go to some local real estate investing meetup groups and ask around. 

Good luck!

@Nick L.

You may be right. That does raise some more questions, though. What should I be seeing that should make ME feel comfortable with this deal?  Sure we all know what a good residential deal should look like for a buy and hold, but what should a good ground lease investment with a bunch of time on the clock look like?  Are there guidelines on what expenses should look like in relation to the cash flow? Admittedly, I haven't yet looked at the DCF proforma calculations, so maybe it will become obvious there, but I do wonder what kinds of numbers should I be looking for that would make an investor want to buy this kind of deal.

@Mark Creason

I don't have all of this information yet, but hope to learn more soon. The only concrete numbers I have right now are a gross operating income of 125k, and they are looking for 500k with ~65 years on the clock. It's not enough to make any judgements I don't think. The strip is located in a suburb of Baltimore.

@Nick L.

This is helpful. Thank you for this. I will check out the spreadsheet and look into it with more details on this deal!

@Joel Owens

Thanks. I agree there does seem to be a lot of risk. The acquisition costs are unsecured and you lose a lot of benefits of investing in a tangible asset that you actually own and control. I'm leaning away from this deal, but I feel that being an insider is beneficial, I just don't know how to take advantage of that so everyone can make some money.

How does a deal like this get financed? Where does the equity actually go and what is used for collateral? 

I will try and get some more information on this particular deal this weekend. It seems as though anything could be the case. 

@Daniel Chang

Thanks for explaining. I'm really thinking there is a disconnect in my understanding of how this type of deal is profitable. It seems as though you're buying a cash flow stream that depreciates, and is worth less money over time. And you can't leverage this, or make it grow in value, then at the end of the term you don't even own it anymore. It seems like a great deal for the land owner, and a pretty bad one for the investor.  There isn't much info here on BP about a typical land lease purchase scenario and how that could look for your portfolio over time, so I am having difficulty following. 

@Daniel Chang

Thanks for the information. I'm wondering how useful this type of investment would be for me. The acquisition cost seems to be a sunk cost in the end, and the value would actually decrease over time rather than increase. Am I getting this right? For what reason might an investor like myself purchase a deal like this rather than a commercial deal that includes the building and land together?

Thanks!