I Bought a $2M Car Dealership
And sold it for $900k profit with close to $0 tax bill
Today I’m sharing a real estate deal that made us $900,000 profit.
It starts with an empty car dealership.
If you’d like to get access to my real estate deals and passively invest alongside me…
Now onto today’s newsletter.
How to Spot Opportunities
It was February 2020.
The start of covid.
I typically invest in multifamily and luxury storage.
But debt was cheap.
A car dealership in my hometown sat empty for a year. I have no interest in buying car dealerships.
But I saw an opportunity to buy a property in a great location with cheap debt.
So, I contacted the owner.
The $2M Purchase
The seller wanted $2M.
No matter how creative I got, I couldn’t make sense of a deal this size.
But I kept digging.
The seller owned a few nearby parking lots. I knew he’d have no use for these once he sold the dealership.
The best part: the lots were 5 feet from a new gas station that needed more parking.
What did this mean?
As soon as I had it under contract, I could sell the parking lots to the gas station.
Creative Financing 101
So I went to the drawing board.
I asked the seller to include the parking lots with the $2M price.
Also asked him to finance 50% of the down payment for the buildings and lots.
Boom! We had a win-win deal.
I got 75% LTV @ 3.5% for 10 years on a $2M price
Seller financing of $280k at 3.5% interest for 5 years
I needed a down payment of $280k to close the deal
But $280k was still a lot of cash.
I wanted to make it back ASAP.
I immediately started negotiating a sale of the parking lots with the gas station owner.
Selling the Parking Lots
We negotiated for 2 weeks.
I kept sending him pictures of people parking on the lot to create urgency on his part.
He accepted a $250k purchase price!
The bank required me to apply $100k toward the loan.
I put the remaining cash into carrying $11,000 per month of property expenses until I found a tenant!
Selling the Car Dealership for $2.5M
I still needed to figure out how to lease or sell the dealership property.
I wanted to keep it since my debt position was so good.
I knew it was valuable.
Right on a busy road
Perfectly square 2-acre parcel
Attractive to institutional buyers
Then when I least expected it someone submitted an offer for $2.25M.
I told them I was not interested in anything less than $2.5M.
I knew they were an institutional buyer. They knew how great the location is.
I sold to them for $2.5M.
The final Closing went like this:
With a $150k gain from the parking lots, we had a total gain of over $900k.
That’s 4X my initial investment.
Now to avoid the tax liability.
1031 Into My Next Deal
I used the money from the sale to buy a new piece of land for our next luxury storage development.
Avoiding taxes by 1031 exchanging into the next deal.
In real estate, you are only limited by your creativity.
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How were you able to use 1031 exchange without holding the property for 1 year?
Always enjoy reading these newsletters Marc 📈