A tough decision (lease, attorney, 2011, agent)

[redwhiteblue]

I Would love to get some opinions about my current situation......

I have fallen into a situation where I am able to receive a decent amount of cash OR take ownership of a commercial piece of property.
The property is approx 4 acres with a business on.

So here is my question, in this economy would you take land and a biz or cash?

Thanks in advance to all those that offer their opinion.

[(901)]

Originally Posted by redwhiteblue

I Would love to get some opinions about my current situation......

I have fallen into a situation where I am able to receive a decent amount of cash OR take ownership of a commercial piece of property.
The property it is approx 4 acres with a business on.

So here is my question, in this economy would you take land and a biz or cash?

Thanks in advance to all those that offer their opinion.

That depends on several factors:

How old are you?

Do you need cash bad right now?

How much are they offering($) compared to what it is appraised for?

Is the property located in an area that has potential growth or decline?

[ruready1st]

In real estate its Location, Location, Location.

Does the business on the property generate income? How long is the lease? What are the prospects of it being a long term investment?

Has a commercial real estate agent run comps for you? What market research have you done?

Personally I prefer long term income over a quick cash out. If I was looking at it, there are so many factors, I would have to have lots of details and do research to make that decision.

[redwhiteblue]

Let me give you a little more detail.
The property is a very unique piece of property and has been used as a landscape yard for the past 15 or so years and was very profitable. Right now as it stands it needs a little TLC but can be up and running within a month and making money.
I know the property well because it's been in my family.

I do not need cash right now would I like it sure who wouldn't but I am living fine on my own.

What makes me nervous about getting cash is the ability to make money with it and invest wisely.
While at the same time the dollar is slipping in value.

On the other hand real estate sucks right now and this property I am looking at has gone down 150k in the past two years.

If I take the property I can either run the business myself or lease it out to someone else who will and just collect rent.

I know there are so many factors but I just thought someone would make a statement here that may kick up a thought or two in brain that I may have not thought of .

Thanks!

[StealthRabbit]

Are you getting a 'present value' for the property, or a 'potential' value?

You really need an appraisal, 'as it sits', (if it is vacant, it is gonna appraise very low). Previous income could possibly help you do some projections.

I feel income producing real estate is a good inflation hedge and should be PART of your total portfolio (I use ~ 30% as a RE holding rule for myself)
I vote for taking the best of the options:
1) The property - IF it can provide you with decent PASSIVE income (~7-10% of the capital value annually: passive income = YOU not doing the work / running the business / paying the rent) In this option BE SURE you accurately evaluate the reasonable rents the property could generate. (without significant capital improvements)

2) The payout IF it can better the 7-10% return on property by being invested in another like 'income generating' property (consider tax implications). AND the replacement property would have better equity gain.

3) If you want to run the business, then BE SURE the business can pay the equal rent that an independent business would pay, AND that the rate would not be over market rate for your business. (Hint: hold the property in a separate LLC (preferably a 'flow through' to allow you to take advantage of capital gains benefits), and keep business, property, and personal accounts all segregated)

If the property is truly prime (such as future beneficial zoning, sell, trade, development) then weigh that into the equation. You can't really count on equity growth, but you can position your 'site selection strategy' and buy 'under market', to help get equity growth potential. (This potential equity gain should NOT be used in calculating your return on capital).

For ANY commercial property you really need to get at least a level 1 environmental report to assure you aren't buying a 'super-fund-cleanup-site'. If there has been any automotive / equipment repair, fueling, chemical use / storage, dry cleaning... then you want a minimum of a Level 2 environmental study (with ground borings and soil tests). You also want to hold it in LLC ownership as a liability shield.

[Pro Astrologer]

Originally Posted by redwhiteblue

Let me give you a little more detail.
The property is a very unique piece of property and has been used as a landscape yard for the past 15 or so years and was very profitable. Right now as it stands it needs a little TLC but can be up and running within a month and making money.
I know the property well because it's been in my family.

I do not need cash right now would I like it sure who wouldn't but I am living fine on my own.

What makes me nervous about getting cash is the ability to make money with it and invest wisely.
While at the same time the dollar is slipping in value.

On the other hand real estate sucks right now and this property I am looking at has gone down 150k in the past two years.

If I take the property I can either run the business myself or lease it out to someone else who will and just collect rent.

I know there are so many factors but I just thought someone would make a statement here that may kick up a thought or two in brain that I may have not thought of .

Thanks!

Much depends on location, as one poster wrote, and of course transits. This means that timing is also a factor, how the business will do (even if you rent it out to someone) and what that business will be.

These factors depend on transits over the geographic location, including your own personal transits.

Because the property has gone down $150K in the past two years, you might want to consider how much more it will fall in 2010. Next year will see more declines in residential and commercial property values that will extend into early 2011.

[desertsun41]

Originally Posted by redwhiteblue

I Would love to get some opinions about my current situation......

I have fallen into a situation where I am able to receive a decent amount of cash OR take ownership of a commercial piece of property.
The property is approx 4 acres with a business on.

So here is my question, in this economy would you take land and a biz or cash?

Thanks in advance to all those that offer their opinion.

First of all you have described your situation as "fallen into" to describe a windfall. If you are inheriting money or property I would not describe that as falling. Count your blessings and consult a tax Attorney for his opinion, not us.

[Rakin]

I'm a risk taker, If the property is generating good income I'd keep the land.

Good income or return on investment is very hard to find in todays world.

[texdav]

Thatd epnds on if you know anyhting about the business itself and have the moeny to make it work. Businesss satrt up;ithsi case restartup form what you say;cost money. Do you have the expertise or the time to properly run it. Everybody I know that successfully runs a business spends at elast 60 hours a week runing it .

[nimmysnv]

Originally Posted by texdav

Thatd epnds on if you know anyhting about the business itself and have the moeny to make it work. Businesss satrt up;ithsi case restartup form what you say;cost money. Do you have the expertise or the time to properly run it. Everybody I know that successfully runs a business spends at elast 60 hours a week runing it .

Hi,

With respect to your thoughts it is absolutely correct and this is what actuall required whwn starting a business as to run it successfully lot of hard work is needed anyway.

Thanks!!