Creative deal structure for hill country ranch deal
Investor · Austin, TX · Member since 2014 · 12 posts · 2 votes
Creative deal structure for hill country ranch deal
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesQuote from @Todd Peoples:
Hey all,
I have a good relationship with a non-profit that owns a beautiful several hundred acre ranch in the Texas Hill Country. Unfortunately, a lot of the buildings and systems need repairs and are pretty run down and they don't have the resources or expertise to manage the process. They have a handful of buildings on site.
I'd like to partner with them to restore the property and rent it out for events, weddings, STR, etc. and potentially even sell off half the property for a high end private ranch. They've asked me to propose a partnership structure. The property is probably worth $10M - $15M if they just sold it, but they'd rather stay in the deal so they can use it for the families they serve as well as their own employees and events.
I'm thinking they contribute the land to a partnership where we agree to ownership %'s and I am responsible for sourcing the funds to restore the property and managing the process. Thoughts? I'd love other creative ideas around how to best structure a deal like this.
what I’ve seen done a lot is a master long term lease. What I don’t like about this from the investors viewpoint is that while he may be able to recover his outlays for improvements and earn a good return, ultimately the property doesn’t become part of his estate.
So, I would propose reversing the scenario. The owner sells the property to you for a modest down payment with seller carryback financing for he balance. In turn you do the property repairs, maintenance, upkeep and lease some of the property, now in good condition, back to the seller on a long term lease basis. The rest of the property is yours to development in any way you want.
6 Replies
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
I think it's doable....you'd have to figure out the % though. If you provided all of the management and money needed to do the rehab process, you might get close to 50%, at least on the portion of the property you are rehabbing. Maybe divide it into quarters and chip at it that way...?
I used to do partnerships where I took care of all the work and the money guy provided all the money and we felt 50/50 was good enough for that, so......?
Someone wiser will be along soon.....
- 4yNick BelskyBusiness MemberResidential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
I work with an impact lender and we are doing a loan right now with a non-profit in Colorado. I see your vision, but have a few questions. The lender I work with primarily lends to organizations that are making an impact on the local community. Every investor is profit driven for sure, but aside from helping restore the property, what other things are you planning to do in order to help it thrive? Keep the LTV low and have a SoW with Budget on what repairs/improvements will be made. How these improvements add to value and how the property will be used are large factors. How is the non-profit generating revenue now?
The deal I am working now is structured as a purchase with rehab costs in the loan at 75LTC. Once the repairs are done, they will convert the loan to perm without additional loan fees. The converted loan is 10yr fixed rate interest based on the 10yr Treasury Note +3%, payments are amortized over 30 years.. Right now, that's right under 6%. That can change by the time rehab is done. This is structured as a one time close deal.
Let me know if you'd like to chat about your scenario and see if there's a fit.
Cheers!
Belsky Mortgage, LLC526 Reviews - 4yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
That would certainly be a good deal for you if they throw in a 15M property to a partnership with some large ownership stake.
What happens to the tax benefits of the non profit once it sells to a partnership?
I assume you will lose these benefits.
Maybe you just do a Master lease from the Nonprofit and work out a profit sharing?
- 4yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesThere are so many different ways to structure ‘deals’ That it’s hard to suggest one without knowing who the decision makers are, their motivations, restrictions due to charter, etc., how they came into property ownership, who controls the future visions, etc.
Quote from @Todd Peoples:
Hey all,
I have a good relationship with a non-profit that owns a beautiful several hundred acre ranch in the Texas Hill Country. Unfortunately, a lot of the buildings and systems need repairs and are pretty run down and they don't have the resources or expertise to manage the process. They have a handful of buildings on site.
I'd like to partner with them to restore the property and rent it out for events, weddings, STR, etc. and potentially even sell off half the property for a high end private ranch. They've asked me to propose a partnership structure. The property is probably worth $10M - $15M if they just sold it, but they'd rather stay in the deal so they can use it for the families they serve as well as their own employees and events.
I'm thinking they contribute the land to a partnership where we agree to ownership %'s and I am responsible for sourcing the funds to restore the property and managing the process. Thoughts? I'd love other creative ideas around how to best structure a deal like this.
what I’ve seen done a lot is a master long term lease. What I don’t like about this from the investors viewpoint is that while he may be able to recover his outlays for improvements and earn a good return, ultimately the property doesn’t become part of his estate.
So, I would propose reversing the scenario. The owner sells the property to you for a modest down payment with seller carryback financing for he balance. In turn you do the property repairs, maintenance, upkeep and lease some of the property, now in good condition, back to the seller on a long term lease basis. The rest of the property is yours to development in any way you want. - Investor · Austin, TX · Member since 2014 · 12 posts · 2 votes4y
Thanks for all the suggestions. Very helpful.
- Investor · Austin, TX · Member since 2014 · 12 posts · 2 votes4y
Quote from @Don Konipol:
There are so many different ways to structure ‘deals’ That it’s hard to suggest one without knowing who the decision makers are, their motivations, restrictions due to charter, etc., how they came into property ownership, who controls the future visions, etc.Quote from @Todd Peoples:
Hey all,
I have a good relationship with a non-profit that owns a beautiful several hundred acre ranch in the Texas Hill Country. Unfortunately, a lot of the buildings and systems need repairs and are pretty run down and they don't have the resources or expertise to manage the process. They have a handful of buildings on site.
I'd like to partner with them to restore the property and rent it out for events, weddings, STR, etc. and potentially even sell off half the property for a high end private ranch. They've asked me to propose a partnership structure. The property is probably worth $10M - $15M if they just sold it, but they'd rather stay in the deal so they can use it for the families they serve as well as their own employees and events.
I'm thinking they contribute the land to a partnership where we agree to ownership %'s and I am responsible for sourcing the funds to restore the property and managing the process. Thoughts? I'd love other creative ideas around how to best structure a deal like this.
what I’ve seen done a lot is a master long term lease. What I don’t like about this from the investors viewpoint is that while he may be able to recover his outlays for improvements and earn a good return, ultimately the property doesn’t become part of his estate.
So, I would propose reversing the scenario. The owner sells the property to you for a modest down payment with seller carryback financing for he balance. In turn you do the property repairs, maintenance, upkeep and lease some of the property, now in good condition, back to the seller on a long term lease basis. The rest of the property is yours to development in any way you want.Don, this one makes a lot of sense to me and I think it's the direction I'll go.
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