Bar/Restaurant Loan with apartments opportunity. Not sure how to go about it.
I'm looking at an established bar/restaurant that has 2 apartments upstairs for 140K, I'm not sure what kind of loan would be best for this, me and my wife have been in the bar/restaurant industry for years now with her the past few years managing one. We are ready to go out on our own but aren't real familiar with the loan side of it for purchasing. Is there a different loan since it has apartment rentals? or would this just be a conventional loan?
[{"id": "hux5no7", "text": "Super high risk, your best bet is to go SBA. Traditional lenders will mark that as special purpose and probably make you put 50% down. SBA will give you working capital, lower down payment and additional flexibly. Are you just buying the building or the business is included in that number as well.", "replies": [{"id": "huxa9pt", "text": "Im buying it all, inventory, building, business, everything associated with it. It's an established place with a good reputation. I would feel differently if we had no experience in the industry but this seems like a solid investment, we already have vendors etc in the area from my wife managing the other place she isn't going to leave there until we are ready. Plus I make low end 6 figures so i feel like even if it doesn't work out we won't be bankrupt.", "replies": [{"id": "huxdfpo", "text": "Got it, yea if you have outside income that definitely helps. I would still look to go SBA. Still high risk so just don't go into a ton of debt and you won't end up upside-down.", "replies": [{"id": "huxdvnf", "text": "Appreciate the info, I'll look into it.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "huyf81t", "text": "A lender might classify it like that, but renting out 2 apts will cover the debt on $140k loan. What is that, $500/mo piti?\n\nEven if your restaurant fails you could lease it to someone else. It would just be very very hard to not cover a $500/mo debt service with 3 units to lease.\n\nException to this would be it the commercial space is gutted and the apts are unlivable. I suppose you could default if you run out of money before you get it usable.", "replies": [{"id": "huyfk0d", "text": "Agree 100% but if he is looking to borrow money it only matter what the lender thinks. It's very likely that his restaurant could do well if the note is covered by the Apts and he has outside income. Doesn't strain the cashflow at all", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "huxjroy", "text": "When you say conventional loan, what are you referring to? This is a business loan with mixed use (apartment units and an owner occupied business) bar/restaurants are one of the highest risk business loans and the fact that the loan amount isn\u2019t very large means this is not a very attractive loan to most lenders unfortunately. You\u2019ll need to put a package together to sell why this is a reasonable risk to the lender. \n\nPackage should include:\n*Business plan and financial projections \n*List of assets being purchased\n*historical income statement from the business if the seller will provide that\n*Personal financial statement to show your assets/debts\n*Is your credit score solid?\n*how much cash you have available?\n*Show your outside income will cover the payments (to the extent it does) along with your existing debt.\n*copies of apartment leases\n\nAs other person mentioned SBA may be needed to make lender more comfortable.", "replies": [], "depth": 1}, {"id": "huyermj", "text": "Possible you could do it as an FHA or conventional home loan. I think it\u2019s needs to be 51% residential by sq ft. For FHA at 3% down you need to live in part of it. \n\nhttps://www.fhanewsblog.com/2017/12/can-i-get-an-fha-loan-for-a-commercial-property/\n\nIf you can\u2019t get it as a residential loan, then possible to buy it with a commercial loan (25% down, amortized over 30 years, ballon at 5 or 7). \n\nOr definitely possible with SBA, 10% down on a 25 year note.", "replies": [], "depth": 1}, {"id": "hv1rsc5", "text": "Make sure the PSA includes the liquor license if the town requires one.  In some places, you can sell off them off separately.", "replies": [{"id": "hv1suk9", "text": "It definitely includes a liquor license, I wouldn't even consider thia property if not. They sell for about 80k in my county", "replies": [], "depth": 2}], "depth": 1}]