Central Lake MI Mixed-Use Refinance

George says: "Wow. The borrower is bringing in more money to closing than the amount of our loan. Plus this is a small loan. What an excellent hard money deal."

Blackburne & Sons is pleased to present this First Mortgage secured by a 2-unit, 2,468SF mixed-use property on a 0.25 acre parcel, located in Central Lake, Antrim County, Michigan.

The purpose of this loan is to payoff the existing first mortgage that is secured by the subject, in the amount of $385,000. The borrower will be coming to closing with $247,000 cash, not including closing costs. Due to the amount of cash needed to close, the borrower is refinancing another rental property and pulling out cash to bring to closing.

COUNTY INFORMATION

Antrim County is a county located in the U.S. state of Michigan. As of the 2020 census, the population was 23,431. The county seat is Bellaire. The name is taken from County Antrim in Northern Ireland. Antrim County is home to Torch Lake, Michigan's deepest and second-largest inland lake. Torch Lake, famous for its clear and blue waters, is part of the Chain of Lakes Watershed, most of which lies within Antrim County. The county is bordered to the west by Grand Traverse Bay, a bay of Lake Michigan.

According to the U.S. Census Bureau, the county has a total area of 602 square miles, of which 476 square miles is land and 126 square miles (21%) is water. Antrim County is flanked to the west by Grand Traverse Bay, a bay of Lake Michigan. Most of the bodies of water within the Chain of Lakes, including Torch Lake, are within Antrim County. The Northwest Educational Services, based in Traverse City, services the students in the county along with those of Benzie, Grand Traverse, Leelanau, and Kalkaska. The intermediate school district offers regional special education services, early education and English learner programs, and technical career pathways for students of its districts.

CITY INFORMATION

Central Lake is a village in Antrim County in the U.S. state of Michigan. The population was 960 at the 2020 census. The village is located within Central Lake Township. Central Lake is situated on a lake which is in the center of a chain of lakes and rivers in the county, hence the name. According to the United States Census Bureau, the village has a total area of 1.25 square miles, of which, 1.07 square miles of it is land and 0.18 square miles is water.

In 2021, the median property value Central Lake, MI was $101,400, with a home ownership rate was 79.6%, and the median household income was $51,133. The economy of Central Lake, MI employs 404 people. The largest industries in Central Lake, MI are Manufacturing (108 people), Accommodation & Food Services (70 people), and Health Care & Social Assistance (64 people), and the highest paying industries are Transportation & Warehousing, & Utilities ($62,679), Transportation & Warehousing ($62,679), and Professional, Scientific, & Management, & Administrative & Waste Management Services ($58,750).

SUBJECT PROPERTY DETAILS

The subject property is in the village of Central Lake, located in Central Lake Township in Antrim County, in northwestern portion of the lower peninsula. The village of Central Lake is situated on a lake, in the center of a chain of lakes, hence the name. The subject property is a 0.25-acre, rectangular parcel that is level in topography. It is equipped with adequate parking, paved primarily with asphalt and concrete, exterior lighting and building mounted signage.

The parcel is improved with a 2-story 2,468SF building that was built in 1900 and renovated in 2021. It is class D construction with a Michigan style, unfinished basement, wood framing and brick exterior walls. It has a flat, low sloping roof and aluminum framed glass doors. The building is equipped with primarily fluorescent lighting and a Smart Safe security system.

It has a first-floor retail space that is 1,223SF and currently used as a cannabis retail store. The second floor is a 2-bed, 2-bath apartment that is 1,245SF. The interior walls are primarily painted or vinyl-covered drywall and the interior flooring is mainly carpeting, vinyl-composition and ceramic tiling.

Both units are occupied by the borrower, so it is 100% owner-occupied. It should be noted that the borrower currently lives on the second floor. The entity that operates the cannabis store currently rents the 1st floor from the holding entity for $4,000 per month. Both entities are owned by the borrower. She will be using our loan to pay off the maturing first mortgage that is secured by the subject, in the amount of $385,000.

BORROWER SUMMARY

Our guarantor is a single woman who holds title to the real estate through a Limited Liability Company (real estate holding company). She will also be providing a personal guarantee on our loan.

The borrower also owns a cannabis dispensary which operates the business on the first floor, as well as the adjacent property next door. She is currently 90.99% owner of the entity; however, it should be noted that this entity will not be on our loan. The cannabis entity reported a net loss of ($211,193) in 2022. However, there was a $301,141 in depreciation write-offs. In 2021 her cannabis business reported net loss of ($22,957) and had $14,464 in depreciation write-offs. She has filed an extension for 2023, however we were provided a 2023 P&L showing $51,519 in net income.

Our guarantor works as the founder and CEO of a cannabis dispensary. She self-reports a net worth of $3,189,284 and has a mid-credit score of 721. Her personal tax returns show adjusted gross income of $27,002 in 2022 and $24,462 in 2021. She has filed an extension for 2023.

VALUATION SUMMARY

We hired an MAI appraiser who gave this property an (AS-IS) Appraised Value of $250,000. We also engaged a broker who is local to the area to provide a Broker’s Price Opinion (BPO) who gave a value of $430,000 (AS-IS).

At a 10.0% yield to the investors and a 63.0% LTV (AS-IS 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
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