Mercy Drive Daycare

Blackburne & Sons is pleased to present this Purchase Money First Mortgage secured by a 2,802SF commercial building on a 1.04-acre lot, located in Orlando, Florida.

The borrower is purchasing the subject property for $575,000, and will run his daycare business out of the property. This will be our borrower’s third daycare location, and all locations are located within two miles of each other. The borrower will be coming to closing with approximately $135,000, inclusive of closing costs. The seller will hold back a $115,000 seller second at 5% interest with monthly payments of $2,170.19, and the note is due May 2026. The purchase contract will expire on Friday, June 2, 2023, however, we are trying to get a two week extension in order to give us time to gather funds and close this loan. If you are interested in investing in this deal, kindly send your money as soon as possible.

Orange County is located in the central portion of Florida and is the state’s fifth most populous county. The county seat is Orlando and it is the central county of the Orlando-Kissimmee-Sanford, Florida Metropolitan Statistical Area. According to the U.S. Census Bureau, the county has a total area of 1,003 square miles, of which 903 square miles is land and 100 square miles (10.0%) is water. Orlando Apopka Airport, Orlando Executive Airport, Orlando International Airport are the three airports located within Orange County lines.

In addition to an international airport, second-largest convention center in the U.S., blockbuster theme parks and entertainment options, Orange County is brimming with excitement, arts, culture, sports, recreation and economic opportunity. The county is home to some of the finest public venues in America, including the Amway Center, home to the NBA’s Orlando Magic, the Dr. Phillips Center for the Performing Arts, and Camping World Stadium and Explora stadium for our professional soccer teams, Orlando City Soccer and Orlando Pride.

Orlando is the county seat of Orange County and is the center of the Orlando metropolitan area. According to the U.S. Census Bureau in 2017, it had a population of 2,509,831 and it is the sixth-largest metropolitan area in the Southern United States and the third-largest metropolitan area in Florida behind Miami and Tampa Bay.

Orlando is one of the most-visited cities in the world primarily due to tourism, major events, and convention traffic. In 2018, the city drew more than 75 million visitors. The two largest and most internationally renowned tourist attractions in the Orlando area are the Walt Disney World Resort, opened by the Walt Disney Company in 1971, and the Universal Orlando Resort, opened in 1990 as a major expansion of Universal Studios Florida. The Orange County Convention Center is the second-largest convention facility in the United States. Orlando is home to the University of Central Florida.

In 2020, the median property value in Orlando was $262,500, and the homeownership rate was 37.3%. The economy of Orlando, FL employs 157k people. The largest industries in Orlando, FL are Accommodation & Food Services (19,088 people), Health Care & Social Assistance (18,828 people), and Retail Trade (17,637 people), and the highest paying industries are Management of Companies & Enterprises ($71,622), Utilities ($63,551), and Professional, Scientific, & Technical Services ($60,854).

The subject property consists of one parcel with a total site area of 45,360 SF (1.04-acres). It is generally rectangular in shape and level in topography. Adjacent property in all directions are single family residences and the area is zoned as a Flood Zone X (low risk). The subject site is improved with a 2,802SF commercial building. It was already being used as a daycare by the seller and has playground equipment, etc. and is perfect for our borrower’s daycare business.

The subject improvement consists of a single-story building with a concrete foundation, block exterior walls and composite shingle roofing. The building was built in 1947, however is has just been updated with a new roof and has an effective age 25 years. It is equipped with 8 parking spaces and minimal / typical landscaping. The interior layout consists of 6 classrooms, a kitchen, two bathrooms, two storage rooms, and an office room.

Our borrower is a married man and will hold title to the property personally. His wife will not be a part of our loan or property, although his wife does run the daycare business and has been in the childcare industry for 12 years. Our borrower does all of the maintenance, repairs, and accounting. He is a journeyman ironworker by trade out of local 808 in Orlando, and a member since 1999. The borrower also owns two residential properties with 11 rooms and 1 apartment and has partnered with the Orlando Coalition for the homeless, which provides our borrower with tenants and helps pay their rent.

Our borrower reports adjusted gross income of $480,244 in 2022 and adjusted gross income of $161,519 in 2021. He has a mid-credit score of 575 and a reports net worth of $1,359,690. While the credit scores draw criticism, please note there are no public records, no collections/charge offs, and only 1 late payment on the report.

The borrower reports the daycare’s income through his personal tax returns on a Schedule C. He provided a 2023 Profit & Loss statement on his business showing net income of $298,962.62, year to date.

It is also important to note the borrower was upfront from the time of origination about having a criminal past. He has provided us with a Letter of Explanation detailing this, and will provide in your due diligence package. The borrower explained to us that he was caught selling drugs and had a gun, and ultimately served prison time from 2004-2015. While in prison he worked for UNICOR where he was awarded a scholarship, which helped him to pursue an Associate’s Degree in business management through Ashworth College. He also learned and studied real estate. Most of the criminal activity occurred 20 years ago, but there was a relapse in poor judgment in 2018. The borrower explained that he was in a car with other people and they got pulled over. Our borrower was driving. There were drugs found in the car and no one would take responsibility, so the driver (our borrower) got charged with possession. His attorney advised him that it would be in his best interest to take a plea. He only had to pay a small fine of less than $1,000, and adjudication withheld (would not be judged as guilty). He is now a married man with a family, doing what he can to live a better life and has changed his ways.

We engaged a local MAI appraiser who valued this property at $580,000. We also engaged a local broker who performed an opinion of value. They valued this property at $625,000.

At an 10.0% yield to investors and a 62.9% LTV (Appraised Value) and a 63.5% LTV (Purchase Price), 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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