Board Topic: finance for the first property
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finance for the first property

Posted by: nick bhatt Nov 2 2004, 03:05 PM
Hi everyone
i am planning to buy my first gas station for $ 190,000
i am planning to put $100,000 down and the rest i want seller to finance me
when the seller disclose me all the information about the business i found out that
the lease price is increasing 5% every year according to the contract and right now it's $ 5500/ month (66000/year) which is taking away almost 35% profit of this business
now i am thinking to contact the landlord and make him the offer on that place
i don't know how much should i offer him ?
and my score is only 605 right now and i am not the citizen of USA ( although i have co-signer)
how should get the finance for this property? (lot size is 50X50 and say that landlord is paying $17,000 tax on that property)
i really appreciate if you can answer me these questions
Thank You.

Posted by: loanuniverse Nov 2 2004, 06:13 PM
” i don't know how much should i offer him ? “
While the offer on the business does not have to be tied to the purchase of the real estate, a good place to start would be to read up on the income approach to real estate valuation. Most income producing properties such as this gas station are valued based on the net operating income that they produce.

In the case of this gas station, we are talking:

Rental Income – Taxes – Other operating expenses = Net Operating Income

$66,000 - $17,000 - $XX,XXX = $XX,XXX

Once you have the NOI, you can calculate an estimate of value using a capitalization rate. I am out of the office right now and don’t have access to a gas station appraisal, but using an 8% cap rate sounds like a place to start. Look for information on “income approach appraisal”

You also need to look at comparable sales and maybe talk to a broker or two to get an idea on market conditions. Personally, I would approach this by asking the landlord how much does he want for the property, and use that as a starting negotiating point.

and my score is only 605 right now and i am not the citizen of USA ( although i have co-signer) The score is a concern you might have to explain why is borderline. The citizenship is not a concern unless you want to qualify for certain government programs.


Posted by: nick bhatt Nov 3 2004, 07:43 AM
Thank you very much for your advise
i really appreciate it
email

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