All Forum Posts by: Account Closed

Hey

I am purchasing the building and business for 1M. The business currently does 800k gross - if operated correctly will profit 20% of that. Restaurants usually sell for around a 2X multiple on net income. I would create two different entities one for the pizza shop and one for the real estate. Building LLC pays the loan but with 💵 from the pizza shop / apartment in form of rent. I have been struggling to finance the deal because the seller does not have strong tax returns or a rent roll to show and i don't have very strong financials yet. I have been validating pizza shop financials by working there since his tax returns were 50% less than what he showed on his POS system - so far the business is doing what he says. I have been approved for an SBA loan that would only require 10% equity and potentially less if i can get the seller to hold a note. My concern with SBA is the high rate of prime plus 2.5. It is variable and it looks like rates won't get any higher but who knows. I would be able to refi out in 3 years with no prepayment penalties. I could also raise money through equity investors but would prefer to own 100% of building and business. Let me know you're thoughts and thanks for all of the advise much appreciated

Thank you for the response. I do believe 900k or under is the number i need to hit. I will purchase for around that number. One thing to consider is the value of the business / Business assets. Second gen restaurant spaces always add value to spaces due to the time and money to bring them to life. Considering seller has no tax returns to show he may struggle to sell based off what he claims. I was thinking 900k for the building 100k for business. Let me know your thoughts 

Hi everyone,

I'm pursuing a deal on a mixed-use building in a prime location. Purchase price is 1 million. Seller purchased 3 years ago for $825,000. The first floor is a commercial space housing a pizza shop that grosses $800k annually. If operated correctly, it nets 20% plus a salary for the operator. The second floor is a 4-bedroom apartment that can rent for $2,500-$3,000 a month with $15k in renovations. For restaurants, rent should ideally be under 10% of gross sales, so I believe $5,500 a month is fair.

The seller doesn't have a rent roll or strong financials, and his tax returns are 50% lower than his claims. To address this, we agreed that I would work in the business for six months to verify the financials, which so far align with his POS system.

My main issue is that at 23, I don't have strong financials to get a conventional loan at 75% LTV with a ~7% rate, and the seller's lack of financials complicates bank approval. SBA lenders are confident the deal is lendable, but SBA rates at prime plus 2.5% are high, and I don't want to risk default. I could raise money and bring in partners, but I'd prefer to own 100% of both the business and the real estate. Would love to hear what everyone thinks and am curious to hear everyone's thoughts on the deal - Would be happy to walk anyone interested through it more. Should have it under contract in the next month with a closing Jan 1st. Thanks you guys.

Hi everyone,

I'm pursuing a deal on a mixed-use building in a prime location. Purchase price is 1 million. Seller purchased 3 years ago for $825,000. The first floor is a commercial space housing a pizza shop that grosses $800k annually. If operated correctly, it nets 20% plus a salary for the operator. The second floor is a 4-bedroom apartment that can rent for $2,500-$3,000 a month with $15k in renovations. For restaurants, rent should ideally be under 10% of gross sales, so I believe $5,500 a month is fair.

The seller doesn't have a rent roll or strong financials, and his tax returns are 50% lower than his claims. To address this, we agreed that I would work in the business for six months to verify the financials, which so far align with his POS system.

My main issue is that at 23, I don't have strong financials to get a conventional loan at 75% LTV with a ~7% rate, and the seller's lack of financials complicates bank approval. SBA lenders are confident the deal is lendable, but SBA rates at prime plus 2.5% are high, and I don't want to risk default. I could raise money and bring in partners, but I'd prefer to own 100% of both the business and the real estate. Would love to hear what everyone thinks and am curious to hear everyone's thoughts on the deal. Should have it under contract in the next month with a closing Jan 1st. Thanks you guys.