Stanhope NJ Mixed-Use

George says: "Five years ago, I wrote a blog article that suggested that the wise investor will start moving to lower-yielding loans, the closer he gets to the next great recession. The low 10% yield on this deal tells you that we believe the investment is less risky than many others. No promises or guarantees, folks; but our profit-sharing plan might take a small piece of this deal."

Blackburne & Sons is pleased to present this First Mortgage secured by a 2,820SF 2-Unit mixed-use property on 0.50-acres located in Stanhope, Sussex County, New Jersey.

The purpose of this refinance is to pay off the current mortgage on the property in the amount of approximately $270,000 and to cover closing costs.

Sussex County is the northernmost county in the U.S. state of New Jersey. Its county seat is Newton and it is part of the New York metropolitan area and is part of New Jersey's Skylands Region. As of the 2020 census, the county was the state's 17th-most-populous county, with a population of 144,221. Based on 2020 census data, Vernon Township was the county's largest in both population and area, with a population of 22,358 and covering an area of 70.59 square miles. The county is part of the North Jersey region of the state.

In 2015, the county had a per capita personal income of $55,497, the ninth-highest in New Jersey and ranked 220th of 3,113 counties in the United States. As of 2010 The Bureau of Economic Analysis ranked the county as having the 131st-highest per capita income ($49,207) of the 3,113 counties in the United States (and the ninth-highest in the state). According to the U.S. Census Bureau, as of the 2020 Census, the county had a total area of 535.54 square miles, of which 518.66 square miles was land (96.8%) and 16.88 square miles was water (3.2%). It is the fourth-largest of the state's 21 counties in terms of area.

CITY INFORMATION

Stanhope is a borough in Sussex County, in the U.S. state of New Jersey. As of the 2020 United States census, the borough's population was 3,526. Stanhope was formed by an act of the New Jersey Legislature on March 24, 1904, from portions of Byram Township. According to the United States Census Bureau, the borough had a total area of 2.09 square miles, including 1.84 square miles of land and 0.26 square miles of water (12.25%). Unincorporated communities, localities and place names located partially or completely within the borough include Lake Musconetcong. Stanhope is the southernmost municipality in Sussex County. The borough borders the municipalities of Byram Township and Hopatcong in Sussex County; and Mount Olive Township, Netcong and Roxbury in Morris County.

In 2022, the median property value in Stanhope, NJ was $287,900, with a homeownership rate of 82.7% and the median household income was $125,938. The economy of Stanhope, NJ employs 2.12k people. The largest industries in Stanhope, NJ are Construction (259 people), Retail Trade (253 people), and Professional, Scientific, & Technical Services (206 people), and the highest paying industries are Finance & Insurance ($114,276), Finance & Insurance, & Real Estate & Rental & Leasing ($113,553), and Manufacturing ($104,306).

The subject property consists of a single parcel totaling 0.50-acres. The site is irregular in shape and level in topography. It is equipped with landscaping that is typical for the area and has 128 feet of frontage on State Route 183.

The subject property is located in the New York MSA, which is in line with the State of New Jersey in terms of median household income and is expected to be in-line with the State of New Jersey in terms of population growth over the next 5 year forecast. The subject property is located in Northern New Jersey's 12th largest submarket based on inventory: Sussex County. The site has an open surface parking with 12 parking spaces.

The subject is improved with a 2,820SF, 2-unit mixed-use property that was constructed in 1930 and is currently 100% leased by two tenants. There is an apartment on the top floor and a commercial unit on the ground floor that is occupied by a dental practice. The property is equipped with a poured concrete foundation, masonry framing, brick exterior walls and a gable roof with asphalt shingles. The residential unit is equipped with three-bedrooms, 1-bathroom, in unit laundry and a porch. It is located on the second floor and is currently leased for $2,650 per month.

The commercial unit is approximately 1,250SF and is located on the lower level. It is equipped with a bathroom, waiting room with a front desk, 3 office desk spaces, two patient rooms and a basement. This unit is also leased for $2,650 per month. It should be noted that this property is legal non-conforming use.

BORROWER SUMMARY

Our guarantors are a married couple who will both be providing personal guarantees on our loan. Title to the subject property is held through a limited liability company (LLC), and was formed in 2014. It is 100% owned by the wife. This LLC is a real estate holding entity and does not report any income.

They both work in the dentistry field and together reported adjusted gross income of $590,095 in 2023 and $621,490 in 2022. They have not yet filed their 2024 taxes. They self-reported a net worth of $2,194,079 and have mid-credit scores of 619 and 563. The wife used to operate her dental practice out of the subject property. Due to cash flow issues arising from owning the business, her credit took a hit. She subsequently sold the business to the current tenant. As part of that business sale, she continues to work part-time for the new owner. She also works for another dental practice, as an Endodontist. She explains that now having sold the business, her cash flow issues are no longer present. A letter of explanation will be provided in the due diligence package. The husband is a dental specialist and goes to multiple general dentist offices to perform root canals. This is why there are multiple W2’s and 1099’s for 2024 in the due diligence file.

Our borrowers purchased the subject property in 2014 for $420,000. They are using our loan to pay off the current 1st position lien on their property in the amount of roughly $270,000. This loan is an SBA loan and since the borrower sold her business, the loan has been called. The property taxes are current.

We hired anl MAI appraiser who valued this property at $480,000 (AS-IS). We also hired a local broker who performed a drive-by opinion of value (BPO) and valued this property at $564,000.

At a 10.0% yield to investors and a 65.0% LTV (AS-IS) appraised value and 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.

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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