Onekama MI Mixed-Use Refinance

George says: “We will have a nice, little first mortgage on a newly-renovated building in the safety of the country."

Blackburne & Sons is pleased to present this First Mortgage secured by a 6,900SF, 3 unit, 2-story mixed-use property on 0.24-acres, located in Onekama, Manistee County, Michigan.

The subject property is currently free and clear of any liens. The purpose of this loan is to recoup funds used to renovate the property and supplement business savings. The cash out will also be used for reinvestment into the business itself.

COUNTY INFORMATION

Manistee County is a county located in the U.S. state of Michigan, and, as of the 2020 census, the population was 25,032. The county is named for the Manistee River and its county seat is Manistee city. Manistee County is part of Northern Michigan and has a shoreline on Lake Michigan. Adjacent counties (by land) include Benzie County (north), Wexford County (east), and Mason County (south).

According to the U.S. Census Bureau, the county has a total area of 1,281 square miles, of which 542 square miles is land and 738 square miles (58%) is water. Manistee County is considered to be part of Northern Michigan. Manistee County-Blacker Airport is approximately 3 miles northeast of Manistee and offers direct flights to Chicago O'Hare International Airport. Major highways include US 31 which runs through Manistee and Bear Lake, paralleling Lake Michigan further inland than M-22, and M-22 which begins five miles north of Manistee and goes through Onekama and Arcadia, paralleling the Lake Michigan shoreline and offering a scenic route.

CITY INFORMATION

Onekama is a village in Manistee County in the U.S. state of Michigan. The population was 399 at the 2020 census. The village is located on the northeast shore of Portage Lake and is surrounded by Onekama Township. The town's name is derived from Ona-ga-maa, an Anishinaabe word which means "singing water". Onekama is in western Manistee County, 13 miles northeast of Manistee, the county seat, and 10 miles south of Arcadia. Lake Michigan is 3 miles to the west beyond the outlet of Portage Lake. According to the United States Census Bureau, the village of Onekama has a total area of 0.59 square miles, all land. The M-22 highway runs through downtown Onekama.

In 2021, the median property value in Onekama was $159,700, with a homeownership rate of 88.5%, and the median household income was $39,583. The economy of Onekama, MI employs 181 people. The largest industries in Onekama, MI are Accommodation & Food Services (40 people), Manufacturing (33 people), and Health Care & Social Assistance (22 people), and the highest paying industries are Health Care & Social Assistance ($55,714), Public Administration ($44,000), and Construction ($33,500).

SUBJECT PROPERTY DETAILS

The subject site consists of a single parcel with 0.24-acres of land area. The parcel is irregular in shape and generally level in topography. The site it improved with a 6,900SF two-story mixed-use building, constructed in 1950 (C-Class). It is located right on Main Street with sufficient parking.

Our borrowers purchased the subject property on June 4, 2021 for $300,000 and have spent $328,500 to date on property renovations. The property is currently free and clear of any liens.

The subject is located in the vacation resort community, just north of Manistee, Michigan. It is also just a short distance from lake Michigan. The building has a poured concrete slab foundation and a sloped shingle roof. The electricity is separately metered and charged to the tenants. The site is equipped with street parking, a grade level deck and deadbolt entry doors. The building is comprised of 3 units, 2 residential units upstairs and one commercial unit downstairs. The commercial unit is 3,381SF in GBA and is located on the first floor of the building. The unit does appear to be equipped with a commercial kitchen sink. The tenant just moved in January 2024 and pays $3,500 per month through March 31, 2024, however the lessee is interested in seeking to lease the space for long term.

The two residential units are equipped with 2 bedrooms and two bathrooms in each unit and total 1,380SF each. These units are located on the second floor of the building. They are equipped with in-unit laundry and ceiling mounted light fixtures. The kitchens are equipped with stainless steel sinks, composition board cabinets, ceramic tile back splash, and Formica / laminate countertops. The appliances consist of economy grade electric range ovens, and refrigerators. The bathrooms are equipped with a porcelain sink in a laminated vanity, a medicine cabinet with a mirror, a porcelain commode and a fiberglass tub and shower combination. There is one tenant that leases both spaces for $3,500 per month and uses them as Airbnb units.

BORROWER SUMMARY

Our guarantors are four (4) individuals who hold title to this property via a limited liability company, of which, each are members. The entity that holds title self-reports a net worth of $657,308. It reported a net loss of ($1,361) in 2022 and ($151,279) in 2021. Per the borrower, the losses are due to large interest expenses on the tax returns and the renovations that were being done to the properties. Both properties are free and clear. The borrower’s loaned money to do the renovations and listed those funds as interest expenses on the tax return.

Guarantor #1 is a married man and owns 19% of the borrowing entity. He was born and raised in Caledonia, Michigan. His wife will not be on our loan or on title. He currently owns and resides in a home along the lakeshore near his businesses. As a graduate of Aquinas College with a degree in Business Administration and Management, he has specialized in business operations and team building. He has owned or managed businesses in many industries, including industrial asset recovery, competitive motorsports, and real estate. His passion for people and small businesses provide great value for his business partners. He self-reported a net worth of $1,506,885 and has a mid-credit score of 755. He reports an adjusted gross income of $201,454 in 2022 and $132,323 in 2021.

Guarantor #2 is a married man and owns 43% of the borrowing entity. He is a Michigan native, he has lived in various communities throughout the state. His wife will not be on this loan or on title. After graduating from Rogers City High School, he spent years developing online marketing and lead generation technology and tools. During this time, he served as the President of Business Development for StreamLine Media Group, was a Demand Generation Public Speaker, and founded over a dozen businesses in various industries across the state. He was able to open offices around the world, including locations in New Zealand, Australia, and Indonesia. He has spent most of his adult life building businesses from the ground up. His marketing knowledge and relationships make him a true asset to his partners. He self-reported a net worth of $2,252,187 and has a mid-credit score of 770. He reported an adjusted gross income of $440,764 in 2022 and $352,074 in 2021.

Guarantor #3 is a married man and owns 19% of the borrowing entity. His wife will not be on our loan or on title. Also a Michigan native, he currently lives in the Grand Rapids area. He has centered his professional life on real estate and its management. He has been self-employed in Real Estate since 2004, and is currently a licensed broker in both residential and commercial real estate. One of his early successes were with his Shift Group where he primarily renovated, and flipped rental properties. These businesses have continued to grow and have a portfolio of properties stretching over a dozen states. These businesses have expanded and include management, wholesale purchasing, and seller financing for individuals across the country. Michael’s knowledge of real estate and discipline in business make him a valuable member of the team. He self-reported a net worth of $1,833,552 and has a mid-credit score of 655. He reported an adjusted gross income of $82,277 in 2022 and $41,344 in 2021.

Guarantor #4 is a single woman and owns 19% of the borrowing entity. Also a Michigander, she has been in the taxation and accounting industry for over thirty (30) years. As a graduate of Davenport College, she has spent many years working for CPA firms in the Grand Rapids area. She has prepared financial statements and tax returns for a wide variety of businesses. Over the years, she has also consulted many people on starting businesses, writing business plans, and raising capital for new ventures. Kathy has also saved clients hundreds of thousands of dollars in tax debt, penalties and interest over the years. She holds a personal portfolio of over $1M in real estate land contracts and has partnered with clients in various real estate ventures through renovations, flips, and seller financing. Her wide range of skill sets help to serve the team and their investors well. She self-reported a net worth of $584,377 and has a mid-credit score of 661. She reported an adjusted gross income of ($1,757) in 2022 and $1,965 in 2021.

VALUATION SUMMARY

We hired an MAI appraiser who valued this property (AS-IS) Appraised value of $650,000. A broker was also engaged who performed a drive-by opinion of value (BPO) and suggested a list price of $615,000.

At a 10.0% yield to the investors and a 62.5% 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
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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