Need HML or PI for great deal in NY

I need aquisition money for a nearly 10,000 sq ft building housing nine apartments and a running bar with a closed restaurant portion which we will restart around 4-5 months of aquisition. Building is being sold for $165,000 but appraisal value is around $250,000. The building is in a great location, has had some recent updates, and needs only around $100 for rehab. (Yes, only $100, for a couple of replacement floor and ceiling tiles in one spot, due to an overflow in the above apartment). The apartments are always rented with a waiting list, the revenue for them is app. $4,000 per month; the bar is only open infrequently due to owners declining health but still brings in app. $5,000 per month (could be doubled with longer hours, especially after food section is reopened); the food section, within about 4 months could gross around $30,000 per month; added would be the occasional rental of the second dining room, and the split share of the games. Which translating into terms of usable cash after expenses (minus loan repay-unkown variable until loan and terms are actually set), the amount is roughly $15,000, and from what info I’ve already learned about the whole “alternative financing options”, I would probably only need about $3,000 of that for the monthly mortgage payment. The problem comes with my credit, I have good credit for the last 20 months, but my credit score is only 552 due to some items on my reports-most of them mine for medical bills due to an illness, some medical for my children for medical, and some of them my ex-husbands-but in my name since I used to have perfect credit-so I have to pay them. I can provide a downpayment if not too high and does not require seasoning. Since for the past three years I spent my time going to college part-time, taking care of my elderly mother, and home schooling my son, I have no tax returns, and my income has to be stated since it comes from a couple of part-time off the books avenues. My health has been been better for a while, my son is out of school, and my mothers condition is stable, so now since I have come upon this exceptional opportunity and my calendar is open I can devote as much time as needed to this business, even though with the revenue it is and can be producing, it would still be extremely profitable with just hiring additional employees. In addition to the two bar people already employed there, I already have a couple of possible options as far as experienced kitchen help; and I have bartending, waitressing, cooking, cleaning, books, tax, and manager/owner experience myself.

If any people or entity can help with this or know someone who can, I would greatly appreciate your ideas or info.

The owner is patiently waiting as she would really like to see my family take over-we have met several times as well as calling her periodically and have developed a good relationship with her and her family, but we would really like to do this deal as soon as possible so both sides can move on to do things they need to do. Thanks.

What is your experience in this area? Will you be managing the property? There is a HML section on the left hand side of the site. Find the lender that operates in your state and call them. If this is a great deal, the money should be available. If a HML won’t give you the money, take it as a learning experience for future deals. Don’t get attached to this deal. Make sure the numbers you’re quoting are actual numbers. Keep this in mind. A HML is designed for short term and is very expensive. Are you going to be able to refi into more favorable terms after you own the property? Will your credit score improve enough to accomplish that? Are the cashflow #'s you quoted generated using a HML? Since you’re looking for a HML, I suspect you don’t know the actual terms yet. Which means your cashflow #'s are inaccurate. These are just some things to think about before getting into financing the property. Good luck.

There is a lot more information that is needed to determine if; a) this is a viable deal, 2) whether or not you can secure financing.

Given your choice of words, it sounds like the gross income are estimates (particulary the restaurant numbers)—how are you basing your income projections (financial statements, tax returns or owner accounts)

Bear in mind, that this is just one component that you will need to get a handle on.

As important, is the NOE or net operating expenses—you need to quantify how much it takes to operate this mixed use business in order to get to what really matters and that is NOI or net operating income.

As this is a commercial property, property value should be based on cash flow and not necessarily property value—how are you estimating value?

This being said, although you have experience in the different facets of running such a business, it appears that you have no operator experience (this will work against you).

There are asset based commercial loan programs offered on the market, but none of which will offer someone of little background (or your FICO—you need a 580 or above) or invested interest (you would need a 30% down payment).

I’ll spare you the time and energy—a hard money lender will have the same concerns that I have expressed (and some more) and your best bet is to bring in a credit partner with operating experience.


Scott Miller