Delree Street Mixed-Use

Blackburne & Sons is pleased to present this First Mortgage secured by 7.72 acres of land with 1 Single Family Residence, one quadplex, and 76 self-storage units, located in West Columbia, SC.

The purpose of this loan is to payoff the current note holder in the amount of $250,000 and to provide cash-out for property renovations.

Lexington County is a county located in the U.S. state of South Carolina. As of the 2020 census, the population was 293,991. Its county seat and largest town is Lexington. The county was chartered in 1785 and was named in commemoration of Lexington, Massachusetts, the site of the Battle of Lexington in the American Revolutionary War. Lexington County is the sixth-largest county in South Carolina by population and is part of the Columbia, SC Metropolitan Statistical Area. It is located in the Midlands region of South Carolina.

According to the U.S. Census Bureau, the county has a total area of 758 square miles of which 699 square miles is land and 59 square miles (7.8%) is water. The largest body of water is Lake Murray, while other waterways include the Broad River, the Saluda River and the Congaree River. Lexington County has urban, suburban, and rural landscapes. Much of the county's urbanization is in its eastern and northeastern areas.

CITY INFORMATION

West Columbia, formerly Brookland, is a city and commuter town in the suburban eastern sections of Lexington County. According to the 2010 census, the population was 14,988, and the 2019 population estimate was 17,998. West Columbia is bordered to the east by Columbia, the state capital, across the Congaree River. The city is bordered to the south by its sister suburb, Cayce. A small portion of the city borders the town of Lexington to the east. West Columbia is part of the greater Columbia, SC metropolitan statistical area.

In 2020, the median property value in West Columbia was $156,200, with a homeownership rate of 57.9%, and the median household income was $44,282. The economy of West Columbia, SC employs 8,700 people. The largest industries in West Columbia, SC are Retail Trade (1,179 people), Health Care & Social Assistance (1,048 people), and Construction (881 people), and the highest paying industries are Utilities ($66,350), Professional, Scientific, & Technical Services ($46,477), and
Educational Services ($43,929).

The subject property is located on the south side of Delree Street. It is comprised of 7.72 acres, is irregularly shaped and generally level in topography. The immediate neighborhood of the subject property is all zoned RD – Restrictive Development and mostly consists of mobile home parks. The property is improved with an Single Family Residence, one quad-plex, 9 mobile homes and 76 self-storage units. Currently we are working with the title company to secure the mobile homes as part of our real estate collateral, given that they are the mobile homes are permanently affixed to the land. However, if we cannot secure them in this manner, we will encumber the mobile homes under a UCC-1 filing. The structures predate the current zoning code and were grandfathered in, so the current property use is legal, non-confirming. Given the age of the mobile homes, we are unable to locate the VIN numbers needed to perfect title to them. Therefore, it is important to note our loan will NOT be based off their value.

4029 Delree Street is the Single Family Residence that is leased to a tenant for $1,480 per month. It consists of a 3,625SF brick and block structure built on a concrete slab that contains three bedrooms and one bathroom.

4027 Delree Street is the quadplex (units 4027-10 thru 4027-14 with 4027-11 as the garage). It is a permanent structure that is a 1,400SF brick and block four family building built on a concrete slab containing one three-bedroom one bathroom unit and three one bedroom one-bathroom units. This structure also contains a garage that is known as 4027 #11. These units are fully leased out at $650 – $1,200 per month.

There are a total of 76 storage units contained in two detached buildings. The first building is a 1,500SF brick and block building, built on a concrete slab. The second building (large warehouse) is a 5,250SF brick and block building that is also built on a concrete slab. Roughly 20% of the storage units are currently leased. Many of the remaining units are located in the building that needs a new roof and are therefore unrentable at this time. The cash out from our loan will be used to put new roofs on these structures so they could immediately rent them out.

In addition to the permanent structures there are nine mobile homes on the property. These mobile homes are considered personal property and owned by our borrower. They lease out to tenants at $575 – $850 per month. There is also a large barn on the property used for personal storage.

The borrower plans to complete $171,500 in property renovations with the cash out from our loan. These renovations include putting new roofs on some of the self-storage units, fixing the roof of the large warehouse, paint, HVAC, new windows and doors, remodeling two bathrooms, new wiring and panel box, and ceiling and insulation in the large warehouse building, and new gravel, paint, and parking lot in the mini-storage units. A copy of the rehab budget will be provided in the due diligence packages. We are not holding back funds at closing.

BORROWER SUMMARY

Our borrower is a married couple who hold title through a Limited Liability Company, each owning 50%. They will also provide a personal guarantee on our loan. The husband works as a Fire Engineer for the City of Columbia, and the wife works as property manager for the numerous rental properties that they own and manage.

Per the borrower "all of our mortgages, aside from our primary residence which is paid for by the income from the Fire Department, and all of our business expenses, are 100% paid for by the income properties they are tied to. We have 27 properties, with 124 units that are 95% occupied and we flipped over $1M in real estate last year. We have also owner-financed properties to several individuals. Our business pays for itself. Our gross monthly income from our rental properties is over $70k/mth and growing. This does not include our owner-financed properties, or our revenue from our fix ’n flips. In addition, many of our properties are owned free and clear. We have been doing this together for 14 years, with Jordan having started at the age of 17 years old on his own with his first property. "

They self-reported a net worth of $4,543,243 and they have mid-credit scores of 788 and 714. In 2021, on their personal tax returns they reported adjusted gross income of $180,338. In 2020, they reported adjusted gross income of $165,471. An extension was filed for 2022 personal taxes and they plan on filing by October 15th.

The LLC reported an Ordinary Business Loss of $10,136, however after adding back depreciation, the net loss was $5,210. In 2021, the LLC reported a Ordinary Business Income of $13,980 in 2020, however after adding back depreciation the net income was $18,066

They have filed an extension for the 2022 LLC tax returns, however they provided a 2022 & 2023 YTD profit & loss statement. In 2022, they reported net income of $24,826, however after adding back depreciation their net income was $43,002. Their 2023 P&L (through July) reports $29,651 in net income.

The borrower purchased the subject property in December of 2021 for $320,000. At the time it was purchased, only four units were occupied. They fully renovated all residential units and mobile homes which are now 100% leased. Currently, 20% of the 76 storage units are rented with the other portion needing a new roof.

VALUATION SUMMARY

We engaged a local MAI appraiser who provided an (AS-IS) value of $745,000. We also engaged a local broker who performed an opinion of value. They valued this property at $565,000.

At a 10.0% yield to investors and a 60.4% LTV, 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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