Mixed Property - Restaurant/Residential to Purchase and Divide

[Patrick D.]

Hello BP Community,

I am in the food business and have been for a while now. Being a successful restaurant/deli owner I am trying to increase my net worth and begin investing in real estate.

Here is the lowdown on a property I am looking at.

This property is on the market for 1.5m. It consists of four lots, three of which are empty and one that an very old, outdated restaurant sits on. It is in a beautiful town with much potential and these are pretty much the remaining lots to build on.

Here is my idea. I would like to purchase the full package, make an offer around 1.2m and see what happens. Even if I get the land + restaurant for 1.4m I think I can make this work. The only problem is I don't think I will be able to go to a bank to get conventional financing on a deal like this. I have to think creative, way outside the box.

Houses in the neighborhood go for somewhere b/w $500,000-$600,000. My idea is that right off the bat, I take two of the four lots (lets say lots #1 & #2), partner with a builder who pays costs to build the houses (+labor) and split the profit of the sale 50/50 of lots #1 & #2. Now, I would take the other two lots, turn one into a parking lot/outdoor dining area for the restaurant (lets call this lot #4) and keep the other one as the restaurant (lot #3). On lot #3 there is a small cottage behind the restaurant that I can collect about $1500 a month rent.

If I can get an investor to lend 1.5m (for purchase of the lots + buildout of the restaurant) does anybody think this will be worth it? I am looking for the investor to hold a note on the property, 100% secured by the property.

Any ideas or insights on how I could make this work or if anybody thinks it is worth it? Basically I would be getting the two lots (#3 & #4) for pretty cheap (as there is a rental cottage behind the restaurant on lot #3 to help pay the note off) and have a business to sell down the road.

How should I structure this? As for LLCs, should I LLC each individual lot + the business?

Not sure if all of this makes any sense, just looking for insight...