Advice for obtaining a loan
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[{"id": "fy1qtvd", "text": "You'll get a better deal being 51% owner occupied. Not sure what type of situation you're current in that \"half your income regardless of what you make\" is your rent but in an OORE transaction the rent you currently pay is added back as available for debt service on the new loan.  The bigger question is can your business qualify for the loan on the mixed use property? How long have you been in business?  How consistent is your cash flow?  What strength do you have as a personal guarantor?", "replies": [{"id": "fy20t5h", "text": "This is it. Owner occupied real estate is underwritten very differently than investment real estate.\n\nEven if you told a lender this was for investment only, they would care a lot about the tenant that goes into that space. I am quite sure your mortgage wouldn't allow you to lease space to yourself.", "replies": [], "depth": 2}, {"id": "fy22aov", "text": "I am a tattooer so half of what I make goes into the pocket of the shop owner for the roof over my head. I still purchase my own supplies etc. \nI pay taxes as a sole proprietor - so I also worry without having an LLC it\u2019ll be harder to consider this a business. I\u2019ve been in business for 5 years. \nI own an out of state rental that doesn\u2019t have a mortgage on it, cash flows $1100 a month after taxes and prop mgmt fees etc. I\u2019m considering selling it for the down payment. My tax return are not impressive - we obtained a mortgage on our current home via bank statements showing income. I have a feeling this won\u2019t fit it for a business loan.", "replies": [{"id": "fy23mqq", "text": "So you have a schedule C from the tattoo business and a schedule E page 2 for the rental property? Or is this all under the table which is why you provided bank statements for your personal mortgage?", "replies": [{"id": "fy2p2zo", "text": "I know the rental is on the books as such, I have a prop mgmt company that gives me all the numbers for my tax person at the end of the year. The majority of my business is cash - I don\u2019t work for anyone, I simply pay someone half of my money at the end of the day. So I suppose it gets reported however a cash business would since my tax person is definitely operating on the up and up.", "replies": [{"id": "fy2qiey", "text": "Go get your 2018 form 1040 (and hopefully your 2019 by this point too) and look.  That schedule C income is going to be what qualifies you for this loan as OORE. Its needs to be above (could be close given some add backs) to the new debt service for this building for  the last 2 years or you're going to have to try something different.  A 0.5x debt service coverage won't get approved, SBA or not.", "replies": [{"id": "fy2vknc", "text": "Got it. It\u2019s listed as schedule ac income. Is the debt service excluding the rent I would get from the residential property above? That would give me another $1800 or so a month to work with. Would a lender be willing to consider how much of my income went to \u201crent\u201d even though it\u2019s not listed as income and then expense on my tax return? It\u2019s simply omitted. If the line on my tax return under schedule C needs to be more than a year of mortgage payments period on this property then no, I will not qualify.", "replies": [{"id": "fy3234m", "text": "You'll get some credit for the unit above rent but the specifics will vary by lender.  Some will do 70% of gross potential rents added for debt service others have a more specific underwriting (10% vacancy less taxes, management, reserves etc.) I understand its only one parcel but I can't tell you what each individual lender will assign as the residential unit's contribution. \n\nYou'll need to provide some documentation on the \"rents\" figure you forked over to your current studio owner but typically if you could provide that it would be considered (not necessarily simply doubling your income).  If you don't have documentation you're probably screwed (and this goes triple if you're applying for an SBA loan; gov't loves paperwork).\n\nWrite up a page or 2 on you're expertise, why this is a good location for your business, some industry facts &amp; figures, and put your taxes, a generic personal financial statement, the parcel tax card, copy of the listing, rent documentation, and proof of down-payment in a binder (or a PDF) and boom.  You've just done 80% of what a debt broker would do and saved yourself between 1% &amp; 5% of loan proceeds.\n\nThe last 20% is hitting up lenders with your binder.  Cast a wide net (big banks, small banks, credit unions, online lenders) but don't agree to a credit score pull until they give a term sheet or other indication of interest.  Most will say no, you only need one to say yes.  Don't take the rejection personally; ask what you could do to mitigate the risk and inquire if they have an SBA department (you typically need to exhaust other options to get an SBA guarantee anyway).\n\nBest of luck.  PM me if you have other questions.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fy1wxlw", "text": "Hire a debt broker", "replies": [{"id": "fy21eov", "text": "Hi! Would you mind elaborating? I googled the term as I\u2019d never heard of it. Still unsure where/how a debt broker would factor into this. Thank you!", "replies": [{"id": "fy23bbf", "text": "Don't hire a debt broker.  You have to provide all the information to them anyway and once you've made a package its simple to shop lenders on your own.  Many institutions have policies against C&amp;I brokered deals and you'll get stuck paying a fee out of pocket to do marginally less work.", "replies": [{"id": "fy2bi9n", "text": "This. Don\u2019t use a broker. You\u2019ll probably be going sba, but you need to have your books in order.\n\nSchedule C if you\u2019re a sole proprietor. Make sure all your taxes match your bank records is going sba.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fy20k66", "text": "There are two types of SBA owner user loans. The less expensive one is the 504 but you typically need 3 years of tax returns showing your business history. . Most national banks offer 504. If you don\u2019t have the returns you might be able to get a SBA 7A loan. Go to a SBA mortgage broker for 7A. Often times the lender will want to put a lien on your house. In both cases you can get up to 90% financing and a 20 year fixed interest rate.", "replies": [], "depth": 1}, {"id": "fy2910i", "text": "Commercial lender here. You want it to be owner occupied, you\u2019ll have higher chances for approval and likely better rate and terms. Pm me", "replies": [], "depth": 1}]