Plymouth NC Mixed-Use Refi

George says: “If you keep stuffing your first mortgage portfolio with lots of little pieces of small commercial loans, you should be ready for most economic storms. I can offer you no guarantees of safety, folks; but this is where we recently moved most of our own profit sharing plan. We have determined that if the poop hits the fan again, this is where we want to be - invested in a lot of small pieces of 'junky little commercial loans."

Blackburne & Sons is pleased to present this First Trust Deed secured by a 3-unit, 3,380SF mixed-use property on a 0.057-acre lot, located in Plymouth, Washington County, North Carolina.

The proceeds of this loan will go towards paying off the matured first mortgage on the property in the amount $140,000 and cover part of the closing costs. The borrower will have to come to closing with roughly $9,000 cash.

Washington County is located in the state of North Carolina. As of the 2020 census, the population was 11,003. The county was formed in 1799 from the western third of Tyrrell County. It was named for George Washington. There are three incorporated towns in Washington County; Plymouth is the county seat, while other towns are Roper and Creswell. Washington County is known for rich farmland, extensive forests and abundant public access waters. The Roanoke River and Albemarle Sound form the northern boundary. Lake Phelps is 16,000 acres and is part of Pettigrew State Park in Creswell.

The county has a total area of 424 square miles, of which 348 square miles is land and 76 square miles (18%) is water. The county borders the Albemarle Sound and includes part of the National protected area of Pocosin Lakes National Wildlife Refuge.

Plymouth is the largest town in Washington County and is located on the Roanoke River about seven miles (11 km) upriver from its mouth into the Albemarle Sound in North Carolina's Inner Banks region. Domtar Paper Company, LLC., a paper manufacturer, had been the largest employer since 1937 up until roughly 2009. The town is now re-branding itself as a tourist destination and has built a riverfront boardwalk with views of the Roanoke River. Plymouth is home to the North Carolina Black Bear Festival, an annual three-day event at the beginning of June centered around bears.

In 2020, Plymouth had a population of 3.43k people with a median age of 43.1 and a median household income of $17,594. The median property value in Plymouth was $87,500, and the homeownership rate was 30.4%. The economy of Plymouth, NC employs 1.01k people. The largest industries in Plymouth, NC are Retail Trade (261 people), Manufacturing (163 people), and Other Services, Except Public Administration (136 people), and the highest paying industries are Transportation & Warehousing ($34,659), Transportation & Warehousing, & Utilities ($26,250), and Educational Services ($23,894).

The subject is improved with a two-story retail building built in 1912 retail/residential downtown row building containing 3,380 rentable square feet by executed leases. The building is sited on 0.0574-acres. The subject property is located on the south side of West Water Street east of its intersection with Jefferson Street in the Central Business District of the Town of Plymouth in north central Washington County Plymouth Township, North Carolina.

The property consists of two residential units and one commercial unit. Each unit was just leased up as of August 2023, so there are no historical financials to provide. The ground floor retail unit is leased to a dance studio for $1,000 per month and each apartment is leased for $1,200 per month each for total gross monthly rents of $3,400 per month.

Roof: Flat membrane, no active leaks were observed, and the roof appeared to be in serviceable condition. The roof has been recently inspected and repaired as needed.

Ceilings: The ground floor ceilings are 12 feet high open to the floor joist and painted black. Ductwork is exposed and mounted in the ceiling. Lighting is surface mounted incandescent lights in fixtures. Ceilings on the second are 8ft smooth painted sheetrock with recessed LED lighting.

2nd Floor Residential Units: The residential are a one bedroom/one bathroom studio apartment design. The units have 2 exits to street level. The units have central air conditioning. Each unit is equipped with a dishwasher, laundry washing machine and dryer, ceiling fans, microwave, oven, stove, hood, refrigerator and smoke/CO detector.

Walls and Floor Coverings: The ground and second floors are covered with wood pattern LVT, Luxury Vinyl Tile. Moldings and frames are either painted or stained wood. The walls are painted sheetrock on the second floor with cleaned bare brick on the outer walls on the ground floor.

Windows and Doors: Double hung vinyl windows are on the ground and second floor. The front door is a metal clad security door with stained glass lights. The side entrance and rear doors are metal clad security doors.

HVAC: The entire building has central heat and air conditioning from heat pump and air handling units. The condition of the system is new. The structure was built in 1912 per tax records. The building was gutted and completely renovated in 2023 and the building interior and Exterior is in good condition per appraiser.

All of the mechanical systems, electrical and plumbing have been upgraded and replaced at a total renovation cost of $150,000, per the borrower. The roof has been inspected and repaired as necessary. The building could continue indefinitely in use as retail/residential space. The work appears to have been professionally done and in good order. In this analysis, it is assumed that the improvements have a remaining economic life of approximately 40 years.

The borrower is a single man who holds title through a Limited Liability Company, and will provide a personal guarantee on our loan. We recently made a loan to this borrower on the Plymouth Road Trip Motel. The loan closed in September and the borrower has made his first payment on time.

The LLC will report the subject property’s income through a Schedule C on the borrower’s personal tax returns, starting in 2023.

Our guarantor is a realtor, fix & flipper, and developer, has a mid-credit score of 680 and reports a self-reported net worth of $523,000. Per his application, he owns five properties, although one property is currently in escrow to be sold.

In 2022, his personal tax returns reported a loss of $243,410, however this is due to a large amount of expenses on a Schedule C for his realty business, and renovations being done to his properties. In 2021, his personal tax returns report a loss of $197,937. This is due to a loss-carryover from prior years.

It is important to note, the borrower has been fully renovating this property and just started leasing this property to tenants as of the end of August 2023, so there are no financials on the subject.

We engaged a local MAI appraiser who provided an AS-IS valuation of $250,000.

We also engaged a local realtor to perform a Broker’s Price Opinion (BPO) and they valued the property at $95,000 AS-IS. It is important to note this BPO report has the subject as just a 2-unit and totaling 1,609SF. The subject property is actually a 3-unit totaling 3,380SF.

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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