Board Topic: Commercial property/ business loan
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Commercial property/ business loan

Posted by: Donston Dec 29 2004, 01:31 PM
I've been offer the opertunity to purchase a property with 3 units and a liquor store. Right now the owner is asking $300.000 for the property and $200.000 for the liquor store. I need to make him an offer but his asking price seem high for both the property and the liquor store. I need some advice on how to go about getting financing for the business and property? Also should I start with one or the other or should I try to acquire both at the same time.

Posted by: loanuniverse Dec 29 2004, 02:53 PM
Before considering making an offer, you need to get some information from the seller such as:

- Copies of all the leases.
- A breakdown of the expenses associated with the property.
- If the property is held in a real estate holding company, I will get copies of the tax returns for that company.
- Financial statements and tax returns for the liquor store for the last three years.
- Inventory listing.
- Accounts Payable aging and Accounts Receivable aging {if there is one}

Once you have that information you could make a judgment of the value of the property and the business. The property is simple because you need to come up with an NOI {net operating income} and divide it by a capitalization rate. The liquor store business is a little trickier, but it will probably involve some type of “discounted cash flow” valuation. I know that by now you are probably all confused if you don’t have a finance degree, but when it comes to an investment of this size I think you either have to go through the whole process or find someone to help you.

If I were interested in this opportunity, I would go after the property first. It will be the easiest to value, and the easiest to get financing for. Once you have the property even if you don’t come to an agreement on the business, you could eventually request a liquor license {assuming that the process is not that problematic}, and start a liquor store in the location once the lease expires.

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