Pickard Place Apartments

Blackburne & Sons is pleased to present this First Mortgage secured by one apartment building and one mixed-use building, totaling 14,688SF on 1.44 acres located in Ironwood, Michigan.

The proceeds of this $266,500 loan will go towards paying off their Land Contract of $177,000 and using the remaining cash out for upgrades to the subject properties. These upgrades include Boiler and Plumbing updates ($28,000), Electrical ($15,000), 16 Energy Efficient Doors ($17,400), and new water heater ($3,400). Blackburne & Sons will be holding back $63,800 to be sure all of these repairs are made to the property.

Gogebic County is a county in the Upper Peninsula of Michigan, whose county seat is Bessemer. As of the 2020 census, the population was 14,380. The county is the westernmost county in Michigan, and is one of four Michigan counties within the Central Time Zone. Gogebic County borders Wisconsin to the south, and has a shoreline on Lake Superior to the north. It has long been territory of the Lake Superior Chippewa. The Lac Vieux Desert Indian Reservation is located within Gogebic County.

According to the U.S. Census Bureau, the county has a total area of 1,476 square miles, of which 1,102 square miles is land and 374 square miles (25%) is water. Water features in this county include Lake Superior, Lake Gogebic – the largest lake in the Upper Peninsula- and the Montreal River. The county is also home to Ottawa National Forest and Lake Gogebic State Park.

The city of Ironwood is home to Copper Peak, the only ski flying hill outside of Europe, the Porcupine Mountains Wilderness State Park and Lake Superior. While originally an iron mining town, the area is now known for its downhill skiing resorts, including Big Powderhorn, Black River, Snow River, Mount Zion and Whitecap as well as its cross-country skiing at the Wolverine Nordic Trail System and the ABR Nordic Center. Ironwood is home of the "World's Tallest Indian," a 52 ft (15.8 m) fiberglass statue of tribal leader Hiawatha.

In 2020, Ironwood had a population of 4.93k people with a median age of 49.6 and a median household income of $27,261. The median property value in Ironwood, MI was $52,800, and the homeownership rate was 65.7%. The economy of Ironwood, MI employs 2.13k people. The largest industries in Ironwood, MI are Manufacturing (389 people), Retail Trade (276 people), and Health Care & Social Assistance (267 people), and the highest paying industries are Public Administration ($56,099), Professional, Scientific, & Technical Services ($45,341), and Educational Services ($40,221).

The subject property is a 1.44-acre parcel that is L shaped and mostly level in topography. The site is equipped with public water, sewer, telephone, electricity and natural gas and improved with one apartment building and one mixed-use building totaling 17-units and 14,688SF.

The first building is three stories in height with an average story height of eight feet. It has a concrete slab foundation and brick veneer exterior walls. It is equipped with 15 units, which typically have painted drywall ceilings and carpeted floors. The kitchen and bathroom floors are primarily finished with sheet vinyl. The kitchens have wood cabinets, electric ranges, and refrigerators. It also has a basement which houses the laundry facilities, storage lockers and boiler and hot water heaters

The second building is two stories in height with the average story height being eight feet. It also has a concrete slab foundation and brick veneer exterior walls. has 2 units, 1 commercial unit (1,200SF) and 1 apartment unit (480SF) and 3 stall garages. The apartment has painted drywall ceilings and carpeted floors. Kitchen and bathroom floors are primarily finished with sheet vinyl. The kitchen has wood cabinets, electric ranges, and refrigerators. The commercial unit has painted drywall walls & ceilings and sheet vinyl floors. Heating is provided by individual control hot water baseboard from a central boiler system.

The borrowers purchased the subject properties via land contract in February of 2021 for $225,000 and they currently owe $177,000. They plan on usingPer the 2023 rent roll, this property has only 3 vacancies currently. The 16 apartment units pay between $545 and $895 per month. There is also one commercial unit that pays $1,000 per month in rent, which our borrwers business is currently occupying. The total monthly gross rents for the subject properties are $7,670.

Our borrowers are a separated woman and an unmarried man who hold title to this property through their limited liability company, and are 50/50 partners. This company is the operating entity for the subject property and other 3 rental properties. This LLC reports a net worth of $444,236. In 2020, the LLC reported a loss of $3,939. This is because there was no income or properties owned at that time. In 2021, the LLC reported net income of $2,398, however if you add back depreciation for all of the properties ($14,898) and mortgage interest ($11,079) for the subject property only, the net income would actually be $28,375.

The guarantors have filed an extension for 2022 taxes but did provide a profit & loss statement showing $42,118 in net rental income. They also provided a year-to-date profit & loss for 2023 (through May) showing $14,886 in net rental income.

The separated woman works as a business owner / operator and reported an adjusted gross income of $52,225 in 2021 and $33,618 in 2020. She has a mid-credit score of 722 and a reported net worth of $703,280. She has filed an extension for 2022 taxes.

The single man also works as a business owner and reported an adjusted gross income of $44,682 in 2021 and $56,802 in 2020. He has a mid-credit score of 649 and a reports a net worth of $1,104,499. He has filed an extension for 2022 taxes.

We engaged a local MAI appraiser who valued this property at $410,000. We also engaged a local broker who performed an opinion of value, who valued this property at $275,000.

Comments from the local realtor include:" The subject property has multi-family rental units and a main floor commercial space, it appears to be maintained appropriately and there does not appear to be any major repairs required, although there is some painting around windows, trim on the buildings and garage. Located on a corner lot, plenty of open parking along with a 3 car detached garage, the subject is mostly residential rentals but has a commercial unit also. The subject is located in a small old suburban area but which overall is located in a very rural area with small communities interspersed amongst National and State of Michigan forests, farming lands and recreational properties. Therefore, the search distance was expanded in order to find enough sold properties with the age, size, units and market area similar to the subject property."

At an 10.0% yield to investors and a 65.0% LTV (Appraised Value) this appears to be a reasonable investment. Investing in any first trust deed involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact Tom Blackburne
555 University Ave., Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department of Real Estate -- License Number 829677 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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