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?
Thank you for the tips.
I mentioned it before, but it might have been overlooked. The plot is not lying fallow and unused. It is and has been in use. However, the old form of use has gradually shrunk from being profitable to just about breaking even over the years. So, a new form of use is being sought, which would probably be a big leap into the unknown for the family. Therefore, a complete sale, though painful, is also an option.
I mentioned it before, but it might have been overlooked. The plot is not lying fallow and unused. It is and has been in use. However, the old form of use has gradually shrunk from being profitable to just about breaking even over the years. So, a new form of use is being sought, which would probably be a big leap into the unknown for the family. Therefore, a complete sale, though painful, is also an option.
Hello koha,
Real estate, asset management, and development require constant care. If the profitable income is not reinvested and new plans are not made, everything will slip away.
And even if it is sold: plans for how to safely generate returns from the remaining money are necessary! How things have gone so far should be warning enough.
And in case anyone wonders how a multi-million fortune can disappear through neglect... it’s really not difficult, and you don’t even have to live extravagantly. I even have a cautionary example right in front of me.
So I hope for DD that you will get something going or have it done. The city is close to my heart.
And if it doesn’t work out to your disadvantage, then that’s fine, too.
Real estate, asset management, and development require constant care. If the profitable income is not reinvested and new plans are not made, everything will slip away.
And even if it is sold: plans for how to safely generate returns from the remaining money are necessary! How things have gone so far should be warning enough.
And in case anyone wonders how a multi-million fortune can disappear through neglect... it’s really not difficult, and you don’t even have to live extravagantly. I even have a cautionary example right in front of me.
So I hope for DD that you will get something going or have it done. The city is close to my heart.
And if it doesn’t work out to your disadvantage, then that’s fine, too.
Spunk schrieb:
The previous comment already explained the important details and necessary preliminary work. Which one do you mean?
Spunk schrieb:
So basically, set up a property management LLC and contribute the land as capital. The "heirs" become owners according to their shares. “Basically” – or better: quoting without the crucial details – tax tips can quickly backfire.
Spunk schrieb:
However, this requires an income for all involved to cover their current living expenses, to invest further money into the LLC, and 10 to 20 years of time. If that money were just lying around, developing the land without co-investors would also be possible – do you notice something?
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
11ant schrieb:
If the money were just lying around like that, developing land without co-investors would also be possible... I’ll let you know if I hit the jackpot in the lottery...
11ant schrieb:
Which one do you mean? #14 #17 by Nordannay #20 #22 by you #23 by HilfeHilfe #27 by Hausbauer1 #28 by AxelH. (I prefer the Bayernatlas... it’s geographically closer to me) #31 by cschiko #38 #41 #54 by HilfeHilfe #63 by Alex85
11ant schrieb:
“Roughly speaking” – or better: quoted without the critical details – tax advice can quickly backfire. Again, this is not my area of expertise... I just stumbled upon it while researching what options are available and from what financial volume (€) it makes sense to get involved (starting around 2–5 million €). After that, you pay for professional advice from a tax consultant to really understand how it works. The wealth-managing GmbH (limited liability company) can be the ultimate goal, but before that, simpler structures like a civil-law partnership (GbR) or private individual arrangements can work a lot too. The tax difference was explained in the "child benefit for building" thread.
ImmoScout24 and Govestor Verlag (beware – aggressive sales tactics!) offer free newsletters on topics such as building, renting, taxes, and court rulings. YouTube is full of videos about how to invest money in real estate. The ImmoWertV (real estate valuation ordinance) is freely available online, showing how things really look in practice. Various market value appraisals exist. BORIS was already mentioned.
And yes, these are general statements. You should not take everything online at face value. Common sense cannot be replaced. But if you keep an eye out and extract the personally relevant information and carefully validate it, you can develop a plan. From my personal experience, even a poor plan is better than none at all. Based on my middle-class income alone, I couldn’t build a house. That was already clear to my great-grandmother from Dresden.
Long-term real estate investments also involve the money illusion. This means that if I spend the rental income too early and only cover necessary repairs, I am living off the asset itself! Inflation is relentless.
So, do you want to take on a 10 million € project? Do I have the willingness to operate at such scale? Am I ready to be that consistent in my actions?
Just a rough estimate: 10 million € * 5% return * 10% reserves means the first 50,000 € of income should be set aside to keep the project sustainable. Taxes and ongoing maintenance costs are on top of that.