Life Altering Financial Desicions to Make!!!!.....

[Matt H]

I can't believe all these interesting things that seem to be coming up....

But this is the biggest of all...

So let me know what you're thoughts are on this...

Something major has come up. I have a deal looming on the horizon. It's for 2 very large buildings totaling 105 units. The seller has agreed to sell me the two verbally and also in a letter. But they can't give me a signed contract because they're in the process of buying this big portfolio of buildings. And only once their done can they sign a contract on the two they've agreed to sell me.

The only way I can finance that deal which will cost $660k is by selling a building I have here in the city. It's been up for sale since January. And so far I've come pretty close to selling but I have not been successful with it yet. I have two offers I'm negotiating with right now but nothing solid yet.

So the other day here's what happened...

The only reason someone would buy this building here in my city or any building in my city is to condo convert it. That's the big thing that's going on here. So to try and make the information on my website more informative and attractive I decided to run all the numbers on the condo conversion and add them to my site to show the prospective buyer what kind of profit they would make after paying my price and then doing the conversion.

Well after doing the numbers I was rather in shock!!! Because what happened was that I conservatively calculated that after the conversion whomever owns the building will stand to make $3.4m gross profit. I had no clue that's how much profit I was actually leaving on the table.

And so if I was to just forget about those two buildings I was planning on buying which had the 105 units, I could instead do the condo conversion myself. And after all expenses and mortgage payout I'd be left with around $2.6m roughly. The only draw back is going that route could take as long as 2 years to finally see all that money in.

So what should I do:

A) Sell out the building for around $1.65m now which would only net me about $900k and use that to buy those two buildings that I don't even have a signed contract on, other than a verbal. But if it did go through I'd have my funds reinvested in a matter of 6 months. I'd have great cash flow coming in and no more deals to have to do or worry about.

or

B) I could just forget those two buildings that I've fallen in love with and just do that condo conversion myself, which will net me about $2.6m. That's if the city approves it, and that's if prices continue to rise at the pace they have been. And that's only after I can sell them all off sometime in the summer of 2008. At which point I'd still have to find something new to purchase to reinvest for cash flow.

To most the condo conversion looks way better obviously, but I guess my only concern is that I'd lose those two nice buildings, and also I'd have to wait as long as two years to finally cash out. It's kind of a catch 22. I am leaning toward the condo conversion simply because I have no signed offer on those two buildings, so in some respect that's mere speculation on whether or not that company will actually follow through on their word and sell them to me. But there's also a risk that I may not get city approval on my building, making it worth a lot less if I then intended to try selling, as buyers only paying the top dollars for buildings which they can convert in my city.

I guess when you do the math the condo conversion makes far more financial sense. But I don't know.

So what would you do if you were me, and why?