All Forum Posts by: Sam Mann

 I dont know what experience you have Sam, but with 300k down even if you only use a portion of that for down payment and leave the other portion for reserves, yes I do know of ways to create that income stream but it takes quite a bit of experience or education. If you have someone who can bring in the type of balance sheet with the liquidity a banker is looking for then you could possibly have a higher chance at getting a "loan." Hopefully this partner also has the management experience too, but in that case you'd be a near passive investor and returns may be much lower since your value in that hypothetical scenario is just capital.

You can get financing for a special purpose commercial property such as a motel/hotel with only 15% down assuming you have motel/hotel experience. Without experience you will need at least 20%. Both scenarios assume you will be owning/operating the hotel. Any special purpose commercial properties (hotels, car washes, restaurants, etc) will generally need more of a down payment and relevant management experience.

The trickier part to getting financing is the underwriting criteria especially considering the business will need to generate cash flow to sustain any proposed debt but also provide you with a draw to cover your personal obligations.

Hope that helps.

Honestly, you would need at least $250K if you want to cash flow $40K per year. With that much money, you are looking at properties of around $800K to $1.25 million range. You are looking at revenues between $250K to $400K with properties in that price range.These price range properties will definitely have to be an owner operator type because you will not have enough revenues to cover management expenses. 

As others have mentioned, if it is an independent motel (not flagged), then banks will typically require around 25% to 40% down. They might not even loan you the money if you do not have any previous experience. Your best bet of 20% down would be owner finance.

Maybe you're looking for something that doesnt require experience to manage and operate? Based on Daniel's assumptions above it would be highly risky to plunker down the remaining of your assets on a hope it will provide a consistent source of income with out any or little reserves. Have you considered multi-family or another asset class with more consistent income volatility and less risk in management?

You can get financing for a special purpose commercial property such as a motel/hotel with only 15% down assuming you have motel/hotel experience. Without experience you will need at least 20%. Both scenarios assume you will be owning/operating the hotel. Any special purpose commercial properties (hotels, car washes, restaurants, etc) will generally need more of a down payment and relevant management experience.

The trickier part to getting financing is the underwriting criteria especially considering the business will need to generate cash flow to sustain any proposed debt but also provide you with a draw to cover your personal obligations.

Hope that helps.

With $200K, you have a 20% cash on cash return with absolutely no reserves.  Probably not. 

With $400K, you have a 10% coc return or slightly higher return with reserves.  More likely.

But all this is theory and number talks. Your biggest problem will be getting a loan. You mentioned you have no income. It sounds like you have no experience in CRE. Lenders in CRE take multiple things into consideration, including LTV, debt coverage ratio, your experience as an investor, your personal income, your net assets. If you have no hotel management experience, I don't think a lender is going to lend you money on a hotel purchase for instance, unless you have an experienced hotel management company in place.

$500,000

In reality, there are so many variables to your question that no one can give you a true answer.  For instance, a down payment of 20% really is a residential thing.  Most commercial properties are bout 30-40% down.  But regardless, if you have half a million liquid, I think you have a good chance of achieving what you are speaking of.    

Sam,

You will not get a lender to finance anything for you unless you have verified income and a good down payment reserves in your bank account.