The Capital Stack
Brighton, No Deal
On Saturday August 6, we were going to meet some friends in Brighton. We were running ahead of schedule so decided to “drive for deals”. This is exactly what it sounds like. Drive around an area you would like to own property in and see if anything catches your eye. Sounds incredibly simple but has proven very effective
As we were driving, we saw a for sale sign on the main road, Grand River. This 2.5-acre site has been listed for sale for 11-years and we have driven past it hundreds of times. We kicked ourselves for not noticing it sooner and called the listing agent on the spot. The agent let us know the site was still available. We looked at the local zoning ordinance and discovered the township would requires 3 acres minimum to build apartments. This started our search to find more land around the property to buy and make the parcel larger. The adjoining parcel on the back happened to be an 11-unit apartment building. This was ideal because it was already zoned multifamily and would make getting approval for the new development much easier. We now hoped to buy the 2.5 acres of vacant land as well as the 11-unit apartment building.
On August 11, I looked up the owner of the 11-unit property and called him. He was open to the idea of selling and said, “make an offer”, we offered $900k. At the same time, we offered $250k to the vacant landowner in the front. We hoped to purchase the whole parcel which would have allowed for a 32-unit development. Combined with the current 11-units we would have 43-units total.
The owner of the 11-unit property responded on August 12th and explained that he wanted the purchase price to be $1.5m and would like to invest $300k in the deal at closing so he could be involved in the new development. We agreed to it and got a purchase agreement over asap.
In the meantime, and much to our dismay, the seller on the vacant land ended up taking an offer from a friend, so that piece was unavailable for now. The 11-unit building sits on 3 acres. We still hoped to purchase the 11-unit building and build a smaller 12-unit property on the additional acreage.
We went back and forth with the owner of the 11-unit property discussing a few terms in the PA, we went to his office to get all the DD docs, and discussed our plan for his property as he was also going to invest.
A day later the seller said he had changed his mind and was going to hold off and see if he could get more money. At that point we were out of the deal because paying any more didn’t make sense for us. There’s a chance he comes back to us at some point in the future, but rates have increased significantly since mid-august, and the purchase price will have to be lower which I doubt he will like to hear. At this point, it is doubtful we will end up buying this property. We still love the idea of owning in Brighton and are determined to make it happen.
Major Market News
Encore Village is a large development in the works that consisting of 460 apartments and senior rentals. The 11-unit building and development site we tried to purchase is located on few hundred yards from this new development.
Tips and Tricks
Finding a real estate deal does not have to be completed. Something as simple as “driving for deals” has proven very effective and comes at the small cost of gas, your time, and a cup of coffee. We enjoy the hunt and can’t wait to find our next property.