REAL ESTATE MATTERS For release 12/05/13

BC-glink 12/05 TMS Original

REAL ESTATE MATTERS For release 12/05/13

(NOTICE: For retransmission or other content delivery inquiries, please contact TCA Customer Service, 1-800-346-8798,

Convert home in movie set? Deal sounds complicated

Tribune Content Agency

By Ilyce Glink and Samuel J. Tamkin

Q: We have had an offer for a large hedge fund to loan us the $7.6 million price we are asking for our home. We would take part of the money and pay off a $3 million mortgage and put the rest in an LLC. Records would indicate that the LLC purchased the property as a movie set; we would actually have movie companies filming reality- and Christian-based shows several times a month.

We currently have the home for sale thinking we would size down and travel several months a year. What do you see as a downside/upside to this deal?

A: There are too many big holes in your email for us to give you any reasonable sort of answer, either yes or no. But here are some things to think about:

First, you obviously don't need the money. So, then you have to ask yourself whether it make sense financially. Is there an internal rate of return that you can calculate based on how much income the house will generate over and above its costs.

There are costs that you'll pay the hedge fund for the $7.6 million you're being loaned. You'll also have the expenses and upkeep of the property, such as real estate taxes, wear and tear on the property, and maintenance, such as mowing the yard and replacing carpet.

Against that, you'll have income from movie and video companies. How long you'll have that income depends on how long the television shows are renewed (the cancellation rate is pretty high over all for new television shows) and how long it takes to make the movie.

Next, you say you'll pay off the $3 million mortgage you have and then put the rest of the cash into an LLC. I'm not sure what you mean by that, but even if you have a bank account with $4.6 million in it, what are you going to do with that cash? And, is the play by the hedge fund that you'll continue to rent out the property or that they will now own a percentage of the property and when you sell, they're expecting to get those funds?

If you're not already working with a super-smart real estate attorney and accountant, you should be. There are all sorts of other questions you'll need to ask and details you'll need to pay attention to before you can safely sign on the dotted line.

(Ilyce Glink is the creator of an 18-part webinar and ebook series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her channel. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website,