How I Hacked My Main Street

[Otto Kinn]

Let me first entice you with my story. (If you don't care, just read THE PACED LOAN PROGRAM and HERE ARE THE NUMBERS)

WHAT MAKES ME SPECIAL

Nothing!! I have no college degree, and when I was first living on my own, I saw that spending more than I made was normal. That was until some bad decisions in cryptocurrency lead me to a Dave Ramsey YouTube video that pulled me into a rabbit hole of podcasts, webinars, and BOOKS upon BOOKS that have all shaped me into living on less than I make, and investing in my future.

I've been fortunate to raise my monthly income working for the local telecom company by certifying as a Cisco Certified Network Associate, soon to be a CCNP. Over the span of 3 years at this great job, I'd managed to save $30k which I was fully intending on paying down my house with. That was until I saw my opportunity.

THE UGLIEST SIGN ON MAIN STREET

I was helping the local realtor with some computer problems that he was facing, when I saw a pamphlet on his desk advertising the fitness center on main street with an ugly faded sign on the front. I asked him what he knew about the seller and if it made any money. In short, the seller was too busy to run the gym and just wanted out. The gym itself paid for the utilities, insurance, taxes, and mortgage, but didn't really make any extra money to take home. I asked him why it hasn't been sold already, and his answer was simple. Nobody could make the numbers work. Intrigued, and asked that he could show me around, and so he did.

THE NUMBERS WORKED!!

What I saw was a 6,000 square foot building with a gym that occupied only HALF of that space, but let me remind you of the kicker... THE GYM ALONE PAID FOR THE EXPENSES!! There was an 800 square foot shop space that could be leased, and an 1,800 square foot (treadmill graveyard) that could be converted into a retail space. I was thrilled by what I saw, so I thanked my realtor friend arduously and ran home to crunch the numbers again, and again, and AGAIN. After I was CERTAIN this would work, I contacted the local realtor again to discuss my options, and what he told me changed this good deal into AN AMAZING OPPORTUNITY!!

THE PACED LOAN PROGRAM

He was a member of the local area improvement association, and as such informed me that they will buy down the interest on my loan so long as I bring a new business to town, and because I was going to file an LLC to rebrand the gym entity, I would qualify for their Paced Loan Program. This meant that I am only responsible for paying 1.15% interest on my mortgage payments. Many paced loan programs are different, and you need to do your research to make sure you are not being bullied into another party's special interests. Small town area improvement associations however, are generally interested in incentivizing new business owners, to bring their products, services, and jobs to their local town in order to stimulate and grow the local economy. Fortunately for me, the latter is the position that I had found myself in.

HERE ARE THE NUMBERS

I bought the building AND the fitness equipment for $150,000 ($120,000 for the building and $30,000 for the gym equipment)
I used my $30,000 out of pocket capital for the down payment (plus closing costs etc.)
I spent just under $200 filing an LLC with the state for the fitness center.
I refinanced the property after closing for an additional $30,000 in cash to renovate the other rental spaces.

The gym continues to pay for expenses even amidst COVID.
The shop space is leased for a 3 year term at $700/mo
The retail space will be offered for a fair market value of $1,000/mo

With soon to be 3 businesses operating inside of my building, I will have not only increased the value of the property, but I will have also brought two new businesses to my local town, creating a valuable return for the local area improvement association. Everybody is happy :)

My long term plan will be to sell the gym entity and lease that space to the purchaser for $1,850/mo.

THE BP COMMUNITY

I've expanded my search to other thriving rural communities and have found other Main Street properties with massive potential when combining Paced Loans, with Opportunity Zones, and Main Street Improvement Programs. From an outside view, often the numbers don't work, but when you get creative and bring new opportunity to these small town streets, I think you'll find that it can find it very rewarding for everybody involved.

What sort of creative deals have you put together to turn a boring property into a winner?

Have you found that investing in the community can be rewarding to your pockets?

I'd love to answer any questions or hear about how you may have seen the benefit of their local incentive programs!!