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?
kaho674 schrieb:
Do you have experience with how much, for example, a six-story building with 12 residential units might cost? With experience, 12 residential units are not built as a two-family house layout—how did you come up with that configuration?
kaho674 schrieb:
The plan is that on the site, you can build, for example, 4 buildings. We will build one of them. The buyer, who purchases the plot of land from us, will build the other 3 houses there. Now I understand the "division"—and this kind of rash idea should definitely not become fixed internally before involving a professional. They don’t want amateurs messing around.
Whoever you bring in: make sure to do it before any unrealistic notions take hold within the family circle.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
11ant schrieb:
With experience, you don’t build 12 residential units as a duplex – how do you come up with that layout? That was a completely immature target number of apartments to achieve around 6,000 euros in monthly rental income.
11ant schrieb:
... A crazy idea shouldn’t solidify internally before bringing a professional on board. Apparently, the professionals are really fed up with family-run operations.
So who exactly is the professional you are referring to? A business consultant?
kaho674 schrieb:
That was a completely unrealistic target number of apartments to achieve approximately 6000 euros in monthly rental income. However, making such a statement reveals a lack of understanding. A "partner" senses this and sees an easy target. Within the family, it creates distrust. Then the next partner comes along—this time without quotation marks—but the trust is already lost, so it’s better to work alone. The consequence is that the project will take years to come to fruition.
kaho674 schrieb:
Apparently, the professionals are fed up with family cliques. No, the professionals are more wary of the "industry grandchildren." But just look up Porsche-Piech to get an idea of the paralysing effect of "two family lines." With three or more, it’s obviously even more intense.
kaho674 schrieb:
Who exactly is considered a professional to ask here? A management consultant? The latter might manage to bring them together at best. You shouldn’t imagine "a" professional as a monolith. That’s why I said the foundation needs to remain "large." The complexity of the project developer must match the scale of the project. Could it be that the surrounding plots have already been developed partly because they were larger and could accommodate a greater number of developers competing?
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
11ant schrieb:
Could the surrounding plots have already been developed because they were larger and allowed more developers to get involved? The nearby vacant lots were built on immediately after reunification. Anyone from the former East Germany can imagine how things went with those plots back then... Without knowing the ownership details, I would guess that the rental income is all flowing westwards.
The rest had already been developed before that. So, to be precise, we have an 8000m² (86000 sq ft) gap for building here.
11ant schrieb:
That definitely shows a lack of knowledge. Yes, that’s why I’m asking here first to see what you all think.
kaho674 schrieb:
The surrounding vacant plots were developed immediately after the reunification. That is quite a long time without anyone approaching you yet.
kaho674 schrieb:
Yes, that’s why I’m asking here first, to hear what you all think. Here you’ll find homeowners building single-family houses (possibly with a basement or in-law unit). So, for them, a twelve-unit apartment building sounds really large. For a land developer, “a piece of a twelve-unit apartment building” is basically peanuts. It’s already a good sign if there’s potential for several of those.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/