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:
What price did they say they were asking for?The prospective buyers were chased off the property without being able to make an offer.H
HilfeHilfe12 Jun 2018 08:00kaho674 schrieb:
The interested parties were chased off the property without being able to make an offer. Very professionalHilfeHilfe schrieb:
Real estate agents do not buy, they SELL
(Except if they have a purchase order, which is rather uncommon for factories)
Tell that to your grandchildren / family....
What price did they mention as the selling price?I have met enough real estate agents who are happy to buy properties themselves rather than listing them on the market, especially if they sense a bargain. After all, they are the first to learn about the seller’s intentions. It doesn’t get better than that.
This is commonly done in Munich:
Selling a portion of the land to a developer and receiving apartments instead of cash.
The partial sale is mainly to save on property transfer tax. The unsold portion of the land corresponds to the pro rata share of ownership (MEA) of the apartments.
Alternatively, you can simply sell the entire property. With the money, you can then buy a completed multi-family house and manage it yourself. At this scale, the property transfer tax is naturally considerable. You just have to do your homework.
Taking on a $10 million project alone would be quite risky.
Whether Plan A (with a general contractor) or Plan B (sale) is better depends on the circumstances and experience. Being a landlord with a larger single property is not for everyone.
You could also develop a backup Plan C if you want to keep the land at almost any cost. However, that requires a reliable income for all involved and a lot of time. Unfortunately, the past years have not been used for this.
Selling a portion of the land to a developer and receiving apartments instead of cash.
The partial sale is mainly to save on property transfer tax. The unsold portion of the land corresponds to the pro rata share of ownership (MEA) of the apartments.
Alternatively, you can simply sell the entire property. With the money, you can then buy a completed multi-family house and manage it yourself. At this scale, the property transfer tax is naturally considerable. You just have to do your homework.
Taking on a $10 million project alone would be quite risky.
Whether Plan A (with a general contractor) or Plan B (sale) is better depends on the circumstances and experience. Being a landlord with a larger single property is not for everyone.
You could also develop a backup Plan C if you want to keep the land at almost any cost. However, that requires a reliable income for all involved and a lot of time. Unfortunately, the past years have not been used for this.
Spunk schrieb:
Selling part of a plot to a developer and receiving apartments instead of cash. This is—though very broadly simplified—one of several possible options.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
11ant schrieb:
This is – although very broadly put – one of several possible options. Yes, I know. But since I’m not playing in that league, my detailed knowledge is limited. The important details and necessary preparations were already explained in the previous comment. They correspond to my understanding, so there’s no need to repeat them.
I don’t understand how people just let existing capital sit idle at that level. I wouldn’t put a lottery win in a savings account with 0% interest either. How can anyone be so unimaginative? But whatever.
Then there’s Plan C:
Basically, setting up a property management LLC (Gesellschaft mit beschränkter Haftung) and contributing the land as an asset. The “heirs” become owners according to their shares.
The LLC takes out a loan of about 50% of the property value. With that, condominiums are bought and paid off as quickly as possible. This generates a cash flow that will eventually be independent from the actual land.
However, this requires an income for all parties involved to cover current living expenses, inject additional funds into the LLC, and 10 to 20 years of time.
By renting out apartments, you also learn along the way and come into contact with general contractors.
And I believe the 10-year speculation period does not apply to corporations. So the loan from the LLC could be passed on to the owners, who buy and pay off the apartments privately. After 10 years, the sale is tax-free, and depending on what remains, you either repeat the process or you already have enough cash after selling the units for the LLC to build the first house on the existing land.
If only this had been started 10 or 20 years ago... but as Alf says, “It’s never too early and only rarely too late.”
The internet provides all the information. Once you have developed ideas and options… the next step is to see a tax advisor and get detailed clarification. You have to invest the money instead of watching everything slip away.