ᐅ Sell the entire property or opt for a partial sale with reinvestment?
Created on: 10 Jun 2018 13:41
K
kaho674
There is a large property in the family located in the center of Dresden. It is a residential area—surrounded by 6-story or even taller new apartment buildings. The land is currently occupied by a very old factory building. The owners do not have the funds to demolish this building and replace it with modern new construction. On the other hand, the ongoing costs and rental income are just about breaking even. If income continues to decline, the property could financially ruin the family.
So the question is what should happen with this "factory land." It is quite certain that it could be completely redeveloped since there are multi-family buildings all around. Adjacent to this land is the family’s own business property (including land), which is not intended to be sold as it is their livelihood.
The immediate idea was, of course, to sell the entire factory land. Its value is estimated at around 1-2 million (minus demolition costs), without going into details here. The money could be taken, divided among the family, and essentially spent without long-term benefit.
However, there are also grandchildren who are struggling to establish themselves in Dresden. The family would like to support them over the long term and believes that a rental property would be ideal. Coincidentally, the grandchildren are trained in property management and could help oversee the project.
So the idea came up to sell only part of the land to gain liquidity, demolish the old building, and construct a multi-family house—ideally in collaboration with an investor who would buy and develop the other half. Of course, everything would need to be carefully calculated to see if this is feasible and if the land will generate enough value.
Is something like this possible, or is it just a scam? What would you do?
So the question is what should happen with this "factory land." It is quite certain that it could be completely redeveloped since there are multi-family buildings all around. Adjacent to this land is the family’s own business property (including land), which is not intended to be sold as it is their livelihood.
The immediate idea was, of course, to sell the entire factory land. Its value is estimated at around 1-2 million (minus demolition costs), without going into details here. The money could be taken, divided among the family, and essentially spent without long-term benefit.
However, there are also grandchildren who are struggling to establish themselves in Dresden. The family would like to support them over the long term and believes that a rental property would be ideal. Coincidentally, the grandchildren are trained in property management and could help oversee the project.
So the idea came up to sell only part of the land to gain liquidity, demolish the old building, and construct a multi-family house—ideally in collaboration with an investor who would buy and develop the other half. Of course, everything would need to be carefully calculated to see if this is feasible and if the land will generate enough value.
Is something like this possible, or is it just a scam? What would you do?
HilfeHilfe schrieb:
and factory buildings
wasn't DD not bombed out? If a small excavator hits a few bombs there
you will have high costs on your hands Why? That saves demolition! Boom!
H
HilfeHilfe11 Jun 2018 13:08kaho674 schrieb:
The question is definitely whether you can actually rent out the apartments at reasonable prices. People always say there’s nothing available in DD. But when I search on Immoscout, I find plenty of rental listings.This is a bit too ambitious for you. First, you would need to find an investor to pre-finance the down payments, which would then be covered by rent over several years.
The traditional project model is to build and then sell at a premium. At least that way you have initial cash flow from notarized sales contracts. That’s what my developer once told me. At least 50% of the units need to be sold for the excavator to make the first cut.
For your project, you will easily need double-digit million amounts. You don’t have a network, and don’t expect the property developer "GRO?KOTZ GmbH" to take a junior partnership with your amateurs.
You need “stupid money.”
HilfeHilfe schrieb:
that is a bit out of your league. Possible. Do you have any experience with, for example, the cost of a six-story building with 12 residential units?
H
Hausbauer111 Jun 2018 14:12In terms of price, multi-family residential construction is not that far from building a single-family house. For a single-family house, you can expect around 2000 € per m² (2000 € per 10.8 sq ft). For multi-family residential buildings, 1500 € per m² (1500 € per 10.8 sq ft) would already be very cheap. I have no idea how many square meters the zoning plan would allow on the plot.
If we assume 1200 m² (1200 m² / 12,917 sq ft), we are talking about at least 1,800,000 € just for the construction.
If we assume 1200 m² (1200 m² / 12,917 sq ft), we are talking about at least 1,800,000 € just for the construction.
H
HilfeHilfe11 Jun 2018 14:13Hausbauer1 schrieb:
In terms of costs, multi-story residential buildings are actually not that far from single-family home construction. For a single-family house, you can estimate around 2000 € per m² (approximately $216 per sq ft). For multi-story residential buildings, 1500 € per m² (about $162 per sq ft) would already be considered very affordable. I have no idea how many square meters the development plan allows for the lot.
If we assume 1200 m² (13,000 sq ft), that would amount to at least 1,800,000 € ($1,950,000) just for construction.*5 buildings + parking spaces on the site
so 9 million.
No, I think you misunderstood. The plan is that the site allows for, for example, 4 buildings to be constructed. We are building one of them. The other 3 will be built by the buyer who purchases the piece of land from us, where their 3 houses will be located.
If we could sell, for example, 5,000m² (about 54,000 sq ft) of the total 8,000m² (about 86,000 sq ft) for at least €250 per m² (about $270 per sq yd), we would have 1.25 million in cash to invest in our house.
An average apartment is about 70m² (750 sq ft). 1.25 million divided by 1,800 (price per m²) equals nearly 700m² (7,535 sq ft), which divided by 70m² (each apartment) would be 10 apartments.
The problem is that it’s simply not worthwhile. There are additional demolition costs, as well as expenses for access roads and utility connections (which could be shared with the buyer). Plus, the hassle of dealing with tenants. By the time the investment pays off, 20 years will have passed and the building will already be worn out.
We also considered gutting the factory building and, for example, converting it into a retirement home. But that would require removing all ceilings, a new roof, insulating the walls (even though they are quite thick), possibly adding an extra floor—also a major project that would exceed our financial capacity.
What we really want is a solution that provides the heirs with a steady income down the line. But so far, we haven’t come up with any ideas.
If we could sell, for example, 5,000m² (about 54,000 sq ft) of the total 8,000m² (about 86,000 sq ft) for at least €250 per m² (about $270 per sq yd), we would have 1.25 million in cash to invest in our house.
An average apartment is about 70m² (750 sq ft). 1.25 million divided by 1,800 (price per m²) equals nearly 700m² (7,535 sq ft), which divided by 70m² (each apartment) would be 10 apartments.
The problem is that it’s simply not worthwhile. There are additional demolition costs, as well as expenses for access roads and utility connections (which could be shared with the buyer). Plus, the hassle of dealing with tenants. By the time the investment pays off, 20 years will have passed and the building will already be worn out.
We also considered gutting the factory building and, for example, converting it into a retirement home. But that would require removing all ceilings, a new roof, insulating the walls (even though they are quite thick), possibly adding an extra floor—also a major project that would exceed our financial capacity.
What we really want is a solution that provides the heirs with a steady income down the line. But so far, we haven’t come up with any ideas.
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