Do I Buy Property That Includes Inventory?

Before you can even begin to answer this question you have to really ask what the property itself is worth. If you are sure (dead sure) about the value of the inventory, and you are also sure of the value of the property, then you do have a couple of options.

I can try to explain it better for you. All you need to do is structure a deal with the seller to give him some money down that you can borrow against the real estate and then pay him the rest on a short-term note. Seem easy enough? Let me give you an example.

Okay-let's say you write a contract for five million bucks. You give a half a million dollars down and you give the balance within six months or nine months. Have you figured out where the half a million is going to come from?

You're going to borrow it on his real estate, that's why you need to make sure you know what the real estate is worth. Of course the real estate is going to be worth more than that, but that is the whole point isn’t it?

I know what you are thinking-can this really work? Of course something like this will work. The owner is getting his or her property sold and they’re getting the cash. Think about it-he’s going to have the security against the inventory or property. What’s the downfall? What’s the worst that can happen? You default.

It’s not hard to structure, but if you give a second mortgage against the property, you cannot forget the release provisions. These provisions are needed for when you sell the inventory (you can then pay him and release the inventory).

Think through your exit and make sure there is a release built-in and that you have some money left over. I mean your first objective, of course, is to get him paid off, right?

So, if all of the money that you've pulled out of the property went to him first and then you got what's left over, what do you care?