What was your most creative deal?

Question

I'm sure some of the BP veterans here have some great stories to share.

I'll share some creative paper deals in a bit.

Bill Gulley · Answer

On the condition that I'm not asked how to do it again.

There was a farm in the city, had been held since the mid 1800s by one family. Developers and Realtors tried to get it for over 50 years according to the owner, an 80+ year old lady full of stories.

I explained my intentions to devlope it into low-mod hosuing which was fitting for the area. Initially 124 units, water feature, walking trail, play ground for the kids, etc. She liked the idea and had the cattle removed.

I partnered with the housing autority through a non-profit. The seller provided 100% financing and I set up a note that was particianed into 6 principal parts for her heirs. The housing authority kissed the note by providing management.

We set up a charitable remainder trust and funded the trust with the note. Additionally, the seller funded the non-profit with funds for the soft costs of development and costs of the non-profit. Then put a trustee in place that agreed to accept the note payments. This was done to address the tax issues with a zero basis due to the length of time the property was owned.

Closed the land purchase in less than 90 days from the first conversation.    That was probably my most "creative" deal touching on estate issues, zoning changes, seller financing over 100%, government agency involvment and the usual land issues. All with a very nice little old lady that had questions, concerns and heirs to contend with. It was fun!!!

Karen Margrave · Answer

25+ years ago, there was a parcel of commercial land for sale across from a hospital. There had been a very basic rendering done of a building, and some engineering was completed. We made an offer on the parcel, using an unsecured note as the deposit. We then sought out a HML for the land puchase and construction loan.

My husband found an architect that was very talented, but just getting started to draw new plans. After scouring the state for a lender to make a construction loan on a 10,000 sq. ft. SPEC office building, with the only skin we had in the game being the engineering that the seller had actually paid for, and our selling commissions, I found a lender to do the deal (funded the purchase the land and construction loan). To top it off, we actually were paid our commissions, so we had no money into the deal.

We then started construction, and began advertising it for lease while it was under construction, and advertising for investors to purchase. By completion we had most of it leased, and shortly after sold it to a family investment group. We then took the profit from that and built a 15,000 sq. ft. building down the street whcih we leased to a State agency, then a medical/dental clinic for an Indian tribe, then ....

Loc R. · Answer

I was going to wait a bit to reply, but Bill egged me on to reply.

I haven't done anything super creative, but I have increased my yield on a note by re-structuring terms.

I bought a note that had 164 payments left of $350 at 9% interest.  UPB was about $33,000.  I paid $24,500 for the note.  I told the payor that if they willing to increase their payment to $600 a month, I would decrease their interest rate to 7%, and that this would shorten their term to 66 months.  In order to sweeten the deal, I sent them over 2 amortization schedules:  (1) with the current 164 payments left, and (2) with the 66 month schedule.  The difference in interest?  About $18,000.  SOLD.

My yield went from 14% to almost 19%, and my equity/security in the deal grew a lot faster every month.

Bill Gulley · Answer

Hmmm, that's another long story, I was the Executive Director of the non-profit, salary+, +, +. That deal bought me a new extended cab F-150 4x4 with frills, and about 40K, (about 6% of the sale) in the late 90s, still have the truck, it has 72k miles on it.

But what was even better were all the "ouuus and  ahhhs, how'd you do thats, and what did you dos?" The deal was heard in some circles nationally and received calls from PHAs, can you tell us how to do that?

The deal was very unique, it was mostly hitting the seller where the heart was, she had been approached for commercial deals, mostly industrial projects and she didn't want to see her property with smoke stacks and metal buildings.

I knocked on her door and introduced myself, a couple minutes to break the ice and chit chat, when I told her why I wanted to talk to her, I could see a cold stand offish stare. She was wearing overalls and rubber boots, the simple farmer look, but I could tell she was a very wise ole gal.  She asked who I was again and was rather disinterested until I mentioned that someday the property would change and she could have input as to how it was changed, that my idea was to provide low-mod housing. Her stare went away to a receptive look and when I mentioned that kids needed safe and affordable housing and that a playground was part of the proposal, she lit up and asked me inside. After coffee and about an hour and a half, we shook hands on the idea and to set up the attorneys for meetings.

From then on she couldn't stop talking about all the little children.

She was a hard nose business lady and financially astute for her formal education, she had worked hard (worked in an airplane factory during the war) and had done very well with her husband who had passed away about 15 years prior.

She passed away before the project was completed but I believe she was pleased with her contributions.

So, don't be afraid to knock on doors!

Bill Gulley · Answer

Karen M., that's the way to do it, use that OPM!

Loc R. Good job man, using the amoritization schedule usually works, at least up to what they can pay, that's like shootin fish in a barrel!

I have many others, but that deal was not the biggest or most profitable, but the most out of the box type with so many players and it's the most gratifying, there are a bunch of little kids playing out there now!

Let's hear some more!!!

Karen Margrave · Answer

Bill Gulley  Wow!! Great war story!

Gregory London · Answer

I hope to have some success stories here in the future.

NA Foster · Answer

Hey Bill-That was quite a project! Is it OK to ask? Was there a profit or did you just do it for practice? Wink-Wink

What was your most creative deal?

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