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.

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Now onto today’s newsletter.

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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.

Our next $4M storage project.

In real estate, you are only limited by your creativity.

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