Middleburgh NY Mixed-Use

George says: "This is another fine hard money loan. The loan is small, which always makes me happy. Small loans have small payments. Secondly, this is an apartment loan. People always need a place to live. Lastly, there are ten different units. The loss of a single renter is not going to destroy our borrower."

Blackburne & Sons is pleased to present this First Mortgage secured by two mixed-use buildings totaling 10-units and 9,500SF on a 0.19-acre parcel, located in Middleburgh, Schoharie County, New York.

The purpose of this loan is to provide cash out to use as a down payment on the purchase of an investment property that is currently in contract. The subject property was purchased in April 2024 for $420,000 cash and is currently free and clear of any liens.

Schoharie County is a county in the U.S. state of New York. As of the 2020 census, the population was 29,714, making it the state's fifth-least populous county. The county seat is Schoharie. "Schoharie" comes from a Mohawk word meaning "floating driftwood." Schoharie County is part of the Albany-Schenectady-Troy, NY Metropolitan Statistical Area. The county is part of the Mohawk Valley region of the state. Schoharie County is in central New York State, west of Albany and southeast of Utica.

According to the U.S. Census Bureau, the county has a total area of 626 square miles, of which 622 square miles is land and 4.5 square miles (0.7%) is water. A growing tourist industry attracts visitors for recreation, the landscape and historic destinations. Visitors come to Howe Caverns, Vroman's Nose, the Old Stone Fort, and the Iroquois Indian Museum among other locales. The Old Blenheim Bridge was among the attractions until it was destroyed by Hurricane Irene in August 2011. Work to rebuild the covered bridge began in 2017.

Middleburgh is a town in Schoharie County, New York, United States. The population was 3,112 at the 2000 census and is located about 45 minutes west of Albany, NY. According to the United States Census Bureau, the town has a total area of 49.3 square miles of which 49.2 square miles is land and 0.1 square mile (0.16%) is water. The eastern town line is the border of Albany County. The Schoharie Creek flows through the central part of the town and is increased by the Little Schoharie Creek and Stony Creek by Middleburgh village. The most prominent geological feature near the town is Vroman's Nose, which is actually in the adjoining town of Fulton and is a popular hiking destination. New York State Route 30 intersects New York State Route 145 at Middleburgh village.

In 2022, the median property value in Middleburgh, NY was $166,300, with a homeownership rate of 63.8%, and the median household income was $48,393. The economy of Middleburgh, NY employs 670 people. The largest industries in Middleburgh, NY are Retail Trade (96 people), Public Administration (94 people), and Educational Services (77 people), and the highest paying industries are Professional, Scientific, & Technical Services ($100,781), Utilities ($88,125), and Manufacturing ($87,188).

The subject property is a 0.19-acre parcel that is rectangular in shape and generally level in topography. The site is located along Main Street and zoned for commercial use. The site is improved with two buildings, built in 1950, that consist of 10 units (8 residential units and 2 commercial units) and a total of 9,500SF.

Both buildings have a concrete poured foundation, vinyl exterior siding and a flat built-up roof. There are also four garage parking spaces located in the rear of the subject property. Three of them are rented to the tenants as storage and one is used by the property owner.

The unit mix is comprised of (6) one-bedroom units, (2) two-bedroom units and (2) commercial units. The one-bedroom units are approximately 580SF each and are each rented for $600 per month. The two-bedroom units are approximately 750SF each and are each rented for $1,025 and $1,200 per month. The two commercial units are approximately 1,156SF each and are rented for $800 per month, each.

Building 337 has one commercial beauty salon on first floor street level and 5 residential apartments above. Building 333 has one commercial pet store on the first floor street level and three residential above. There is also storage units in the back that tenants rent which is included in the lease and also a coin operated laundry room in the rear of the building.

The borrower purchased the subject property in April of 2024 for $420,000 cash and has spent approximately $30,000-$40,000 in light renovations. The property is currently free and clear of any liens.

BORROWER SUMMARY

The borrower is a married man who holds title to the property through a Corporation, of which he is the sole owner and President. He will be providing a personal guarantee on our loan, however, his wife will not be a part of our loan or on title. He self-reported a net worth of $834,978 and has a mid-credit score of 776.

Since the borrower just purchased the subject property in April of 2024, there are no tax returns to provide showing the income and expenses for the subject. His first year of filing will be for 2024. We were provided a 2024 profit & loss statement for the subject which reports net income of $31,735 from May to October (5 months).

The Corporation that holds title to this property reported a net loss of $56,193 in 2023 and $57,971 in 2022. This was for a farm property that the borrower owned that was ultimately sold in 2023.

Our guarantor is a real estate investor and was previously a general contractor up until 2018. His personal tax returns report adjusted gross income of ($468,179) in 2023 and ($423,087) in 2022. According to the borrower, these losses are primarily due to Net Operating Losses carried forward to offset the capital gains from the sale of real estate in 2022 and in 2023. A letter of explanation on this will be provided in the Due Diligence package, for your consideration.

We accepted an MAI appraisal ordered by another lender who valued this property with an appraised value of $610,000 (AS-IS)

We hired a local broker who performed a drive-by opinion of value (BPO) and valued this property at $775,000.

At an 11.0% yield to investors and a 51.64% 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.

ACCREDITATION STANDARDS

Please note this offering is a SEC Regulation D filing and will be done through a Private Placement Memorandum. In order to invest, you must be an accredited investor. Generally speaking, an accredited investor is an individual:

(a) whose individual income exceeds $200,000 in each of the past two years, with reasonable expectation of reaching the same going forward OR
(b) whose joint income with spouse exceeds $300,000 in each of the past two years OR
(c) your NET WORTH exceeds $1,000,000 (exclusive of your primary residence) OR

If you plan on investing through an entity, the entity can qualify if ANY of the following are met:

(a) all equity owners must be accredited OR
(b) any trust with more than $5,000,000 in assets OR
(c) ERISA with either $5,000,000 in assets OR a bank, insurance company, or registered investment advisor as it's trustee OR
(d) any self directed ERISA with an accredited investor(s) making the business decisions OR
(e) an IRA owned by an accredited investor

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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