New business startup

Clearwater, FL · Member since 2018 · 3 posts · 0 votes

I am looking to start either a new business or purchase an existing business. One will be either storage and the other would be campground. Both will need startup of $5m. I have a lender who is willing to lend the money at 15% for 60 months. From what I have read and watched videos on you have to pay this person back monthly which that will be close to $80k a month. When asking realtor to locate a property that will help me make payments that big it was like a slap in the face. How am I supposed to pay them back?

Then from a previous post I read that you cannot use that money for personal use?

How does that much funds arrive in your possession and how can I pay myself out of that money to pay off personal credit to get approved for refinancing?

Please helpo

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Very few investments will be profitable with 15% interest debt. That's the sort of rates you pay for hard money for short term financing until you can get good long term financing in place. IDK about campgrounds (though that is an interest), but I do have an investment in a mini-storage and have been looking at hotels. You can do much, much better than that for financing, if its a good deal and you have money to put into the deal. Expect 20-30% down payments. Experience in running similar businesses, I'm finding out, is often necessary. If you don't have it, you will probably need to find a partner that does.
You make the debt service payments out of the cash flow from the property. Lenders for this sort of deal will look at "debt coverage ratio". That's the net operating income of the property divided by the debt payments. They will want to see that ratio at some threshold, such as 1.25.
Typically when you do the purchase closing the lender will wire the loan proceeds to the title company. The title company disburses the funds to where they are supposed to go.
Very, very unlikely you can get any cash from this loan. Very, very likely you will have to bring a significant amount of your cash to the closing. Once you own the property and start running it, it will generate positive cash flow. You can pay yourself out of that cash flow.
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Stephaney Green
OP
Clearwater, FL · Member since 2018 · 3 posts · 0 votes
8y
This is what they told me
"I am a lender not fund user. I am to loan money and yours is to invest it and repay me with interest.""No other way to receive such amount other then bank to bank wire transfer"
Who's bank does this go to? If property was less I was going to use funds to upgrade property. Is this still doable? What Is the best term to ask for for $5m? I was going to pay for the property outright. And all other expenses outright that way I just have loan to pay back.
I do have experience and have asked for partners but no one answered do you believe I'd make more profit from hotels. The hotel I liked was $2m but need upgrades. If it is out of state do I have to be there physically to check on property?
If buying a existing company do I still need an llc
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