How Can I Buy a $10 Million Office Building From the FDIC For $4 Million?

The short answer is easy; you just need to have the $4,000,000 in cash. That is really the only catch to doing this. Now, what if you and several other people could get together and come up with $4,000,000, then what would stop you? Nothing!!
Let’s back up for a minute. Why would anyone sell you a $10,000,000 asset for only $4,000,000? Here is one of many scenarios. A large company decides to build a new office building. The plans are drawn up and a construction loan of $10,000,000 is obtained. Work begins. The building is projected to be worth $12,000,000 when completed.
In the course of construction the company discovers that one of their sub-contractors is stealing from them by diverting materials and labor to a side project he is doing. The sub-contractor is promptly fired and replaced, work continues but now the project is a couple of months behind schedule.
The project is just being completed when the term of the construction loan comes due. Now the company needs to find permanent financing for the building. The problem is that because the project finished late it is not yet fully leased up and shows poor cash flow. Because of this it is not considered Mandate Letter For Sale Of Property to be a stable project and the banks are not willing to loan the full $10,000,000. In order to refinance to a permanent loan the owner will have to come up with an extra $2,000,000 in cash and he does not have it. Now the bank that made the construction loan has a defaulted loan on its books.
This is where the FDIC gets involved. Their job is to insure that the banks depositors are covered. This bank is in trouble because they have too much debt on Real Estate Marketing Ideas Pdf their books. The FDIC decides to sell off the $10,000,000 construction loan to the highest bidder for all cash. This will clean up the banks balance sheet.
This is your chance. If you have an experienced team that knows what they are doing and if you have gotten together $4,000,000 in cash, you and your team can buy that $10,000,000 loan on the $12,000,000 building for $4,000,000 or 40 cents on the dollar which is the average price paid for notes by buyers who are educated about doing these transactions.
Now think, what could you do with a 12 million dollar office building that you only paid 4 million dollars for? You could make a lot of money, that’s what! Perhaps the easiest exit strategy is to now sell that building back to the original owner for 8 million dollars. This is the best of both worlds. The original owner gets to keep his building and save 2 million dollars, he can now afford to get it refinanced, and you get to put 4 million dollars of profit in your pocket after only 90 to 180 days. Pretty slick isn’t it?

READ  Commercial Real Estate - Predictions About Office Leasing This Year