All Forum Posts by: Ray Hayward

Hello, I have a property I am targeting a property that abuts a shopping plaza currently Is currently Residential if changed to Commercial it could attract fast food chains.  Would changing the zoning from residential to retail for food service make the property more valuable?  

Many thanks for your feedback!  When you say the loan origination fees as well as exit fees, I suspect you mean 1-3% at the beginning and 1-3% at the end correct? 

Hello,

We are prospecting a location for potential new development which may be Condos or apartments. I understand how conventional loans work, but what can I expect for a new construction project while in development?

For example, using simple numbers, let’s say our plan is to acquire the plot of land for $100K. We establish that the complete cost of Construction is $900K to build 10 Condos. Our intent is to have 2 strips of 5 Condos and sell them as quick as possible. We believe each strip will take 1 year to complete each.

1. How much capital would be need to put down to secure a $1M loan for land acquisition ($100K) and funding for construction costs ($900K)?
2. While development is happening, and no money is coming in yet, what are the carrying costs to consider? I realize there will be Taxes and Insurance costs, but what I am trying to clarify is when will we expect to start paying back the bank?
3. And what is a healthy/realistic profit margin to be attractive to the bank/investors? (e.g. If each unit costs $100K, at min. would we want to resell for $110K (10% before resale costs), $125K, 150K etc.)

Many thanks in advance!

Hi David, I was able to do a Title Search (for some reason in my state MA a Law is required to do this exercise). In result, my research was correct. However, the Bank first in time no longer wants to sell the Note. This being said, there are still 2 subsequent Liens on the property and have a couple questions:

First, as a reminder, the property has 2 Municipal Tax Liens (For 2 Parcels of land), Bank Lien #1, Bank Lien #2, and a Promissory Note to a CPA company.

(1) Would purchasing the Promissory Note be enough for me to do an environmental study to protect my asset? (I understand that I would never recover the money, and would be purchasing solely to be able to do the environmental study)

(2) If I did the study, then convinced the Town to foreclosure so that I can attempt to win the property at Auction, would I be able to circumvent the Bank Lien #1? Or what challenges would I face at this point in time?

Again, many Thanks in advance!

I am working through some of these points thank you very much for your intel.  For the Note I believe is First in Time, I have found a Modification on the Registry of Deeds site.  Does a modification change anything in regards to first in time? (I am thinking it does not, but do not want to assume anything)

Yes, I will wait until talking to Title Company over the next couple of days, but do believe the Municipal Tax Liens are automatically first in line. There is one Tax Lien which is approx. $100K, the 2nd one is approx. $25K.

Regarding the Mortgage Notes, I am finding that there was two mortgage notes as to which the original first note was discharged and concerted to a Promissory Note.

The are 3 liens on the property (excusing tax Liens), here is the scenario:

1. Bank #1 Mortgage from 1998

2. Bank #2 Mortgage from 2003

3. In 2007, Mortgage #1 was discharged but then the property was listed in a Promissory Note the same day of discharge (Mortgage converted to Promissory Note)

With the discharge of the Bank #1 Mortgage from 1998 and discharged and converted into a Promissory Note in 2007, does this make the Bank #2 Mortgage from 2003 “First in Line”?

Thank you very much for your time and extreme detail and feedback. I am sincerely grateful.

1. 1.  Title Insurance - I have reached out to a couple title companies and will get the ball rolling on this.
2. 2.  Stature of Limitations - I have studied the mortgage which I believe is first in line after the municipal liens. The mortgage is dated 1998 which states it was expected to be paid back in 5 years. This does appear that it could be past the stature of limitations. (thank you for this insight). This being said, I will need to do more to determine which mortgage(s) are still active and/or first in line. Overall, there are 2 tax liens, 2 mortgages, and a Promissory Note.
3. 3.  Property Value – The assessed value of the property is approx. $450K, however the real value is that the Town is generally open to almost any scenario to replace it if feasible. Whether it be a strip of condos or 30-40 unit apartment building. I have made proposals to all key department heads and they are willing to help should I be able to pull something together. With all liens, the debt is very high approx. $700K. And environmental expert of 30 years told me to expect clean up to be $250-300K before having the study.

Thank you painting a clearer picture for me. It seems I need to know the best path to a clear title. Obtain a mortgage Note which will put me in a safe place to do the environmental study and foreclosure. In the meantime, I will continue to try to work something out with the Widow. I also will be talking with Mass Development about different financing options and grants today actually.

As you can likely already tell, this would be my first project this scale which I know is probably “Medium” size.

Another question, if I acquired the promissory note, which I believe is last in line, would I still be able to foreclose with this?  I have negotiated with the bank to which seems like a very fair price.  But the promissory note is significantly less and I have been in contact with the holder and think I could purchase the Promissory for much less than the bank note.

Hi,

Thank you sincerely for all your insight. I have been working closely with the Town economic developer who says that the Town does not want to foreclosure on the property as they are concerned of the contamination and view the property as a liability. They also claim they do not know who the current is. Researching the Registry of Deeds and Town documents, everything is still in the deceased husbands name. However, through speaking with the Widow and her Lawyer is how I found probate was never done. Studying the Registry of Deeds, they owned a lot of properties and seems they made some creative transactions to pull out as much cash as possible and for lack of better words, it seems they made this building the “catch all” for debt. The building is over 2 parcels, so there is 2 municipal liens, 2 Bank Liens, and 1 promissory note. I did work with a Lawyer which is why I feel we have found the first in line bank. Since this was sporadic pro-bono work, I do think the recommendation of a Title Report would give me more confidence.

I did reach out to 2 Title companies in the past. Both would not work with me because I am not a Lawyer. Does this seem strange to you? Do you know of any companies that would work with me on this?

I spoke to the widow as recently as yesterday in attempt to renew our agreement for due diligence, this time offering cash in advance, yet she is still not interested in renewing. I wonder if she is concerned of liability based on findings?

The most recent mortgage is from 1998, so in studying your message, it seems my best approach is to:

1. 1. Get Title Report
2. 2. Get the environmental study done
3. 3. Negotiate with Widow to obtain her position
4. 4. Negotiate with Bank to obtain Note
5. 5. Foreclosure the property

I am very surprised I could randomly do a study on the site. Would the environmental company ask me for documentation with right to access?

Regarding the Municipal lien, is it true that I could negotiate a deferred payment plan with them and/or only pay principal (Meaning they can elect to forgive interest)?