I'm just an average guy who wants to own/run a mountain resort someday. I see a great one I could buy for 3.3million right now that would net after approx debt servicing (with 25% down) about 100k for my family. I don't have 25% to put down or even close. I have no savings because i'm working on paying off college and marriage debt so I really have 0 down payment. Will it ever be possible for me to buy a resort like I want? This is a dream but one i hope to accomplish sooner rathern than later. Any ideas would be great. thanks.
:unsure:

Is it possible? Yes. With SBA programs you may qualify to put as little as 10% down + closing costs + working capital reserves. This money must come from you or investors and cannot be borrowed or made up with a seller held mortgage. You will not find 100% financing unless the seller is willing to hold a note on the business and property. The alternative is to find investors who can come up with the cash needed.

Any lender will want to see that you have excellant credit and that you have some fairly extensive experience in the hospitality industry as a manager.

Another issue is cash flow. With 25% down and $100k left over after all operating expenses, capital reserves and debt service, you would squeak by qualifying for a loan by putting a full 25% down cash. Putting anything less down would mean the business would not cash flow well enough for a loan. Your cash on cash return would be 12% which is low for a special use/hospitality property.

”… so I really have 0 down payment…”

I do not think is possible to do it without getting some investors into the deal. I think we are also talking about more than 10% even with SBA financing. I would say that at a minimum you would need $500M to get into a deal of this size. There are ways that this can be done such as getting investors to buy into your business and you keeping a percentage of ownership. Some of the “smartest” ownership structures that I have seen are the ones used by a lot of condo converters, which use other people’s money to get their projects of the ground. Granted the length of those projects are much shorter than what you plan to do.

Now regarding the profitability of the business itself, the same thing brought up by Commercial LO occurred to me as I was reading your post “He is investing $825M to get $100M or 12.1% ROE”. In my opinion, that would be too low for this type of business.

You also have to take a look at the amount of money involved here. We are talking about a $3,300M deal, which will involve financing of at least $2,000M. There is no reason why an “average guy” should get involved in this deal, and there is no reason why a lender would lend this kind of money to an “average guy”.

To begin with:

- You need substantial equity. In my opinion at least $500M
- You need successful management experience in a similar business