Residential Condo trade for Commercial

[EdRenkema]

I have a condo in Kimberley BC that is vacant since June 09, not getting renters, now listed for $230K a similar unit in building is listed at $249,900 but market is dead.
There is a commercial building in town with apartments upstairs and 5 commercial rentals down. The vendor has renovated upstairs 5 units and stratified the entire building and put all up for sale. The anchor tenant is a well established coffee shop/cafe just under 2000 sq.ft. the asking price for this unit is $290K, I approached the vendor to do an even trade for my condo and he was interested. We met today and he tried to sell me on the entire bottom 5 units. My only interest is the coffee shop as this is an established business with cash flow renting for $1800 monthly and the operators are interested in owning their strata title. My exit strategy would be to offer seller financing to the coffee shop.
My condo has a $108K mortgage and was appraised at $230K 2 yrs ago, it is a VRM at prime minus .5 with RBC.
Q -Providing the vendor and I can come to an agreement, how would I structure the offer to ensure the tenants committ to a seller financing deal?
How should I approach RBC to provide commercial financing on this strata portion?

The only reason I am doing this is to provide an exit strategy on a property I have been unable to rent or sell.
The apparent motivation for the vendor is to obtain clear title on a property he can fire sale to a cash buyer if necessary.
The vendor and I are still in negotiation and I will be speaking to the coffee shop owner mid next week.

 

[housingrental]

Hi Ed,

If current renter defaults, what will your position be? Ie whats the market value of the shop? How easy will it be to tenant? Do you have interest to carry it and put tens of thousands into leasehold improvements if there is a change over?

 

[EdRenkema]

QUOTE (housingrental @ Jan 24 2010, 09:21 PM) Hi Ed,

If current renter defaults, what will your position be? Ie whats the market value of the shop? How easy will it be to tenant? Do you have interest to carry it and put tens of thousands into leasehold improvements if there is a change over?

Good point but you misunderstood, the current renter will be the next buyer, they currently do want to buy but cannot see past the purchase price or cannot get financing not sure which.
My question was how to structure the offer to include the tenant`s commitment to an AFS or Seller Financing deal.
I know this place well since I frequent it regularly when in town and it does appear to do a good business.

 

[WJW]

Hi Ed,

I hope I`m reading your question right....I would make the offer to the vendor conditional on obtaining the current tenants committment to the AFS or seller financing, just as you would do if you were to make the offer conditional on bank financing or inspection.

 

[EdRenkema]

QUOTE (WJW @ Jan 25 2010, 10:01 AM) Hi Ed,

I hope I`m reading your question right....I would make the offer to the vendor conditional on obtaining the current tenants committment to the AFS or seller financing, just as you would do if you were to make the offer conditional on bank financing or inspection.

Yes good point, it just got more interesting as I received another call tonight from a potential buyer requiring owner financing and I will keep them in hand to provide to the current buyer looking for a trade, they just want to exit from the commercial and if I can provide them with an end buyer I can sweeten the deal for myself and for them.

 

[Thomas Beyer]

QUOTE (EdRenkema @ Jan 24 2010, 09:07 PM) I have a condo in Kimberley BC that is vacant since June 09, not getting renters, now listed for $230K a similar unit in building is listed at $249,900 but market is dead. ..
if condo was 230K 2 years ago it is 160K or less today in Kimberley.

Anything over and above that is gravy.

Kimberley is an economically weak and cyclical town with a few weeks of winter tourism and a few weeks in the summer .. is SE BC far from any major city.

However: if the building owner likes to swap offer him the condo for 200K .. TAKE IT !!

Thus with a mortgage of 108K all you need is the building with the same equity, say 92K. Thus: ask seller to get a new mortgage, you assume it and he assume yours, and you swap properties.

or he gives you a VTB for a few years. Does he want cash ? Do you want cash ?

Banks do not like that title transferring with existing mortgages in BC .. but will likely tolerate it after the title has transferred. They could call the mortgage but may not !

 

[EdRenkema]

QUOTE (ThomasBeyer @ Jan 25 2010, 09:45 PM) if condo was 230K 2 years ago it is 160K or less today in Kimberley.
Based on what?
Are you currently in the Kimberley market?
When were you there last?
Do you have comps?

I was there several days ago.

The unit next to mine closed for $262K a month ago and it isn`t even an end unit, another similar unit is listed for $249,900.
Mine is priced at $230K and based on comps an excellent price.
This is a unique and highly desireable building with sought after amenities.
The commercial unit vendor wants to take mine and liquidate it at firesale price to get some cash as he has loaned some money from hard money lenders at high rates and needs to pay it down.
If I can provide myself an exit by creating seller financing for the commercial tenants (they have expressed interest) and provide my buyer with an end buyer then perhaps I can get him to pay my RE commision.
Either that or I take the seller financing buyer who called me today, as long as I maintain control of the entire deal it is doable!