All Forum Posts by: Dan Seavey

@Brandon L.

I had the deal together, but decided to go another route.  The facility was in a less than desirable area, which is losing population and jobs.  I am still actively looking for the right opportunity.

I spoke with the SBA on a 7a loan, they allowed me to compile the down payment and financing with a local Economic Development board.  They were both willing to make the deal work.  Somehow it was not classified as a "rental business", which they do not lend on.

Good luck on your deal.  Where are you looking to purchase?

About 4-5 months back, I was notified via constant contact by a local auction company of an upcoming property that I had interest in.  10 days before the auction date, I was notified that the auction had been cancelled due to the owner "filing bankruptcy."  From what I understand (US Bankruptcy Court filings), this property has multiple liens on it, and the owner is filing Chapter 11 bankruptcy.  If this auction was lender ordered, then how and why was this auction cancelled?  I am unfamiliar with Chapter 11 filings and wondering if I can expect these properties to be back on the auction board at some point.  As I understand it, Chapter 11 is designed to "restructure" the owners debts, allowing them to liquidate without ruining their credit, but not allowing them to keep any of their properties?

Can anyone explain the Chapter 11 process and if you have experience/knowledge of what happens in this situation?  I am optimistic that this property will come back to auction after the Bankruptcy Court reviews the voluntary petition.

Dan

@Marc Littmann

I am still working on the deal, the bank needs 1,000 different documents regarding previous schedule E, personal financial statements, etc. i have contacted an economic development corporation and they are willing to assist. I am unsure of the exact equity that I will need, because it is a storage facility. They have covered 100% of the down payment In other purchases (I.e. Community businesses, job creators, etc), storage is NOT one of those.

I have thought about going that route. I have looked around and stressed a few options, but have had a hard time finding hard money lenders for business acquisitions, and finding financial partners has been an even harder task. Though, I have not posted anything on BP seeking help, maybe I should try that?

Does a USDA multifamily loan require owner occupancy? FHA guidelines require this, is the USDA different? The website is very misleading, any experience with these or the loan structure? It sounds as though they offer 100% LTV loans.

@Scott Meyers

Local bank said they would not lend without 10% down. I did not ask how many they have done. They are a preferred SBA lender according to the SBA site, but unsure how many they have done. Have you done a 7a with no money in the deal? Are there ways around the 10% down? They did not seem to care if the seller would carry the 10%, as they wanted some skin the game.

This is a deal that I have been interested in for a while now, but just can't seem to pull it together. Am I being irrational to think that I can get into this with no money down? Any experiences or advice you may have as to working with the SBA and pulling deals together, would be greatly appreciated.

Yes, the full 10% injection needs to be from the buyer, this is what the BANK is saying. I have not asked this question to the SBA? Isn't it ultimately the banks decision, not the SBA? I assume the seller would be willing to contribute 10% to bring the deal together. I can contribute 5K. A FINANCIAL partner would be OK, but at this point I am not interested in a partner that is involved in the business.

@Michael Wagner

I have been having a hard time finding the 10% equity for the purchase. The bank, SBA, and local economic development program are all willing to make the deal work at 90% financing, I just do not have access to the 10% cash. So as far as this goes, I have stressed many different alternative options to try to pull this together, but have had no luck. It is most likely a no-deal at this point, unless I can figure another option. Any suggestions that you may have, I would appreciate!!

@Clay Smith

Unfortunately, no. I think the owners would have worked with me if it wasn't for their realtor. I think she talked them out of the deal. She was saying that the sellers were not budging on price of $199K and that they needed me to pay realtor fees, closing costs, etc. Costs came to around $17,000, which defeats the purpose of the entire deal.

This has been on the market for almost 5 years!! Price keeps dropping and deals keep falling through. (They had it under contract with an FHA owner occupant, had the current tenant [of 8 years!!!] move out, all to have their financing fall through. It's a solid piece of property in a great location, with great rental history, but at these initial costs, and some rehabbing required in the near future it's just not the right deal.

@Ellis San Jose

Thanks for the advice. I was seeking help with configuring an offer to present to the realtor. I had offered 175K verbal, with 100% financing. Since that will not work I think if I were to go with a sub-2, the offer will be lower. Do you suggest avoiding balloon payments in general? I figured this would make the offer look appealing to the seller, if they were to finance the entire property.

Market value I am unsure of. Comps in the area are in the 250-400K range. Of course these properties are slightly newer, but SF are similar and rental amounts are very close. To replace this property I think it would be roughly 275-300K. I am unsure of the last time they had the property appraised. I wanted to avoid that because I know it will appraise for much more than what they think. This would sway them from selling at a lower price, I believe. I know that I should not figure things, but this is part of what attracted me to this deal. I know this property is worth more than 175K. Upon purchase I would immediately have equity.

I have read the 2% rule, and that sounds a little far fetched. I don't think there is a property within a 50 mile radius of my location that falls into that category, even in the less desirable areas of the cities. This property would have to yield $3,500/Mo. If I were to utilize the 2% rule here, purchase price would need to be $95,000. In this area half an acre of land is typically that price. This property has been under contract twice, the financing has fallen through (I assume they are FHA owner occupant offers). Maybe a price closer to 150K is more realistic? This would yield closer to 1.3%.