Opportunity to buy Commercial Prop for my business

[Jacob Whitney]

Hello All,

My name is Jake and was looking for a littler advice. I own 4 bar and grills now and have them pretty well taken care of by a management team. We own the RE on one of the properties but hoping to do so on more.I came across a deal in my area super cool location which was a restaurant/pub but has been closed down in part to Covid and passing of one of the owners. 

-Not 100% sure but he possibility of owner carrying a contract is a possibility. So could get a solid rate on a note. 

-Another option getting some more expensive quotes on SBA loans which is sounding like a lower down is an option but rates in the 9's. 

The building is pretty close to turn key depending on how much or little I want to switch things up. I see putting in $50,000-$75,000 in start up cost.

Confident Ill be able to be pretty successful with the location as far as the restaurant side of these goes.

Should be able to get into the property for around $200,000 down.

My long term plan is to hold onto the business's for 5-10 more years and then sell off the business and hold onto the Real Property. But have a couple other ideas that might work as well.

1-  Buy RE and open the biz and sell the biz in 5-10 years and hold onto the RE.  Best guess would be able to sell the biz alone for $800,000-$900,000 +/- in 5-7 years. After some decent track records have been established.

2- Another option might be to purchase the RE and get the buisness up and running and then the Biz off in about 18 months or less in order to develop a little track record. Best guess on sales price given a short track record would be maybe $350,000-$450,000    again +/-.

3- Less likely to be able to do this would be to purchase the business and then sell the equipment as a start up stlyle sell. Could probably sell that for $100,000-$150,000.

Anyone have any success in this or have any suggestions. Is this a smart way to getting into commercial properties or would it make more sense to lease locations and work on purchasing real estate in either the residential, MF side or even invest in commercial space that I do not occupy?

The property as it sits is a single tenant property, its been on the market a little while about 10 months now and thinking it could go for around the $1.1-$1.2M range putting payments right around $8,500 range. A little bit in value add but nothing super amazing. If I was to purchase the property now as is and lease it out would be about break even to cash flowing only $400-$700 or so a month. Might be able to squeeze  a bit more rent if I was to put that $50,000-$75,000 (mentioned above) into the property. 

Thanks BP

[Henry Clark]

Hopefully the bar and grill isn’t in your town called Boring.    haha

Sounds like a great fit with you.  Restaurant is not worth much, you bring value.  

Economy is up in the air.   Very few people are going to want to start a bar and grill.   Thus you bring value.

What are property taxes and insurance on the property?  You again bring value to the property.    

If someone goes a different way than the existing bar and grill they would have to factor in a higher retro into their offer.  Again you bring value.

You bring value to the property. Push the envelope on your offer. Ask for an interest only loan portion of seller financed for one year. Ask for a 3 year lease versus a 5 year lease with no downpayment. With a purchase option, with the lease amount going against the purchase price. Don't do NNN. With staggered lease rate the first year. Just cover utilities, taxes and insurance. No facilities.
.  
The above lowers both your risk and initial cash outlay.  Use this as your starting point.   Value creation in commercial is being able to bring value to the property.  Your in power.