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?
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Caspar202021 Jan 2019 14:10Since you need meters for water and heating, just contact the ones mentioned above.
By the way, how many residential units are we talking about?
By the way, how many residential units are we talking about?
Caspar2020 schrieb:
Since you need meters for water and heating, just contact the ones mentioned above.
How many residential units are we actually talking about?Sorry if the wrong impression was given. We are considering planning apartments. Or to put it differently, we are only including them in the plans – whether we actually carry it out is another matter. Theoretically, it would be 4 floors with 8 apartments each.At the moment, it looks more likely that the spaces will be rented as workshops for commercial use. In that case, there would probably be 4 units per floor. But that also depends on the potential tenant.
The demand for apartments is probably relatively “secure.” However, you have a lot more issues with the tenants, and the investments are just enormous. The demand for commercial spaces is less certain, but the investments are far less at risk.
N
nordanney21 Jan 2019 15:04kaho674 schrieb:
At the moment, it looks more like the spaces will be rented out as workshops for commercial use. That would probably mean 4 units per floor. But that might also depend on the potential tenant. Light commercial use or workshops on multiple floors? Every bank loves that... You lack a clear usage concept.
There are no long-term lease agreements, and frequent tenant turnover leads to corresponding costs. The effort to rent out is very high; nothing works without a real estate agent. Demand from what kind of users (?) – a lawyer certainly wouldn’t rent next to a workshop?
kaho674 schrieb:
Demand for apartments is probably relatively “secure.” However, you get much more trouble with people, and the investments are simply huge. Demand for commercial space is more uncertain, but the investments are much lower. I agree with you on demand. But not on the costs.
You won’t see a significant difference between commercial and residential costs (if that were the case, the commercial fit-out would have to be so poor that you wouldn’t find tenants). For commercial spaces, fire protection is more important, and building services are a major issue as well (IT infrastructure, HVAC, tenant improvements).
Based on what we have observed for some time with this property, if I had the choice, I would personally quickly step away from commercial use. I have too often seen the hassle with properties like this.
kaho674 schrieb:
Yes, long distances should be expected. The building itself is 40m (131 feet) long and has 4 floors... I think what’s holding you back in your mental images is the fact that you know the property and are familiar with it. A professional real estate developer approaches it without emotion and often comes up with unexpected solutions.https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
For commercial use, you could save quite a bit on equipment compared to what a residential tenant would expect nowadays. This starts with underfloor heating. Plumbing would be simpler and less extensive, and there might already be rooms that could potentially be reused. Regarding energy saving regulations, I'm not sure—since it wouldn’t be a change of use, would there be existing use rights? Workshop areas are naturally larger. Correspondingly, there would be fewer doors and walls, electrical outlets, switches, paint—basically what a wall usually requires.
Fire protection probably doesn’t differ much—there are wall suppliers offering so-called “prefabricated fire walls.”
So, I believe there is definitely a noticeable difference. And yes, the spaces wouldn’t be suitable for grocery chains like Edeka and others. They already said 15 years ago that they didn’t want to move into such spaces. It would be more suitable for online retailers, or maybe a carpenter, artist, or someone else—I don’t know.
Fire protection probably doesn’t differ much—there are wall suppliers offering so-called “prefabricated fire walls.”
So, I believe there is definitely a noticeable difference. And yes, the spaces wouldn’t be suitable for grocery chains like Edeka and others. They already said 15 years ago that they didn’t want to move into such spaces. It would be more suitable for online retailers, or maybe a carpenter, artist, or someone else—I don’t know.
nordanney schrieb:
I have too often seen the stress involved with such properties. We have already rented commercial spaces in that area and are managing very well. On the contrary, we are actually more worried about residential tenants.
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