Update Latest 1031
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Update Latest 1031 (by Ray-N-Pa [PA]) May 24, 2023 3:23 PM
       Update Latest 1031 (by James [GA]) May 24, 2023 4:00 PM
       Update Latest 1031 (by Ray-N-Pa [PA]) May 24, 2023 4:58 PM

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Update Latest 1031 (by Ray-N-Pa [PA]) Posted on: May 24, 2023 3:23 PM

My down leg sold roughly seven weeks ago. My LTV was about 40% so I had about 60% in cash after the sale.

I IDed a total of five places and still stayed under the 200% rule for my Up leg.

I picked up a fractional interest in a series of producing oil wells down in Texas in the Permian Basin. I didn't want to buy that much oil at one time so this made up about 45% of what I needed to spend. Unfortunately, up here they will not allow you to leverage OGM. I mentioned this opportunities to others here, but haven't heard back from anyone. They are probably sold out already - if you were sleeping.

I am under contract for a 2.080 sq/ft metal box located on 0.78 Acres on the busiest road in the county - a four land US Highway. This was a machine shop but the owner had passed away. The two kids, both in their 40's, were anxious to sell the place and get the estate settled. The sales price was at $349,000when dad was alive, but they jumped at my offer of $149,000. I asked them to carry the financing and they said NO to the financing. So I countered back at $139,000 with a 60 day close. I also offered them $139,000 for the three and half acres of undeveloped land next to the building with them carrying the paper. They again said NO on the financing.

I plan on offering them $115,000 for the land just before we close on the building with the bank financing it. As for the building, I have the land trust already made up and a commercial tenant already lined up. He is willing to pay $1,200/month NNN, so the Cap Rate will be 10.3%. We should be closing on this the end of June.

My other two places that I IDed, were auction properties with the auctions being in early July. That doesn't give me much time between the land and the auctions if the seller's get froggy. Seven acres across the road from this is listed at $425,000. Then again, this is along US 6 and 322 and less than mile where US 19 connects with it.

IDing price on auction properties was tricky - do you really know what you will buying a place for? But I made teh numbers work for that 200% rule


Update Latest 1031 (by James [GA]) Posted on: May 24, 2023 4:00 PM

Ray -

I'm still interested in OGM. Life has been getting in the way for a bit, I hope to reach out in a couple months.

One question I think we can all benefit from. You stated you had returns of 40-50% last year on the OGM you bought in the past couple years. How much has the sales price changed (per therm/BTU or what ever metric they use) from the purchase in the past, to this OGM purchase? Do you view the OGM properties overvalued, or undervalued or at parity valuation currently?

Awesome buy on that steel box. How did you find it? --65.129.xx.xx

Update Latest 1031 (by Ray-N-Pa [PA]) Posted on: May 24, 2023 4:58 PM

On OGM rights, you are buying a future rate of return based on what the researchers believe the price point will be. The oil was valued with 9-11% returns but I believe 8-10% is more realistic for the long haul. OGM plays can be as small as $50,000 or as big as eight figures.

Along that long haul path, there can be lots of bumps. Did your power bill go up in 2022? When I bought the natural gas back in 2020, the futures were selling at about $1.95 MBTU with a five historic swing of $1.80 to $5.10. That 8-10% return meant that they were thinking the future's price was going to near that level for a long long time. In the spring of 2020, factories were being shut down and oil futures were even negative for about two days. (My stones are not that big to bet on oil when the price is negative - but boy do I wish I did looking back).

Of much of 2021, natural gas was trading in the $3 range. My 2021 1099, showed I was getting paid about 14% return on my investment that year. Then Ukraine occurred - Russia has lots of gas, but it has to pass thru specific pipelines to NATO countries. Natural gas futures spiked upwards of $10 MBTU. My wells in WV returned $24,000 on a $50,000 investment in 2023. The wells in SW Pa only returned $21,500 if my memory is correct. Just the same, I bought in expecting to $4,000-$5,000 each year.

Now gas has returned back to the $2.30 level. My monthly check from EQT was $460 way down from the $2,600 of nine months ago.

Most LLs would be surprised if you learned that your heating utility bill is locked in with a gas future price of over $4 a unit when the market is $2.3.

So what are my thoughts long term? Utility companies thought they were helping us out by locking in at $4 and consumers will be paying that for a while. That will keep natural gas a good buy at $2.3.

as for my quarter million play on Oil - the government has been trying to play games with the price of gasoline by playing the strategic reserve discharge game. We can let those reserves go only so low, then they have to be refilled. The refilling will cause gas to go up an extra 0.15 a gal. Crude is trading at $73/bar. With all this green energy talk, do you suppose drillers have a huge incentivization to drill new wells? If prices drop below $40/bar and stay there - things might get tough. But I foresee prices going up not down. We are at the low point in a year

My truck runs on oil not pixie dust. If the electric car craze picks up steam, you will need natural gas to to create the power to charge them up. Instead, I see gasoline lasting for 20 or more years. The inter-structure simply doesn't exist to support the green ideas. And so many environmentalist are publishing these papers from air conditioned office spaces. I am not saying climate change isn't real. I am saying - when there is a change, there will always be winners and losers. Here the winters are going to be harsher, but shorter....so more growing season for farmers.

I am alright with an income source paying me about 9%, and never calls me. --24.101.xxx.xxx

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