Commercial Real Estate Investing

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Sarah Montgomery
  • Rental Property Investor
  • Houston, TX
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Recs: learning materials buying/selling businesses

Sarah Montgomery
  • Rental Property Investor
  • Houston, TX
Posted Jan 13 2022, 14:50

Any recommendations on podcasts/books on buying a business with the underlying real estate?

My husband and I are looking at buying a waterfront restaurant along with the a little over 4 acres. I work in CRE in my day job. There's some excess land that I think would be great to create an out parcel to either sell or ground lease to another user which would juice the cash flow. We'd be buying both the waterfront dirt & the business.

We’re working through due diligence and would bring in an experienced management group to run the bar/restaurant. The seller is open to seller financing but still working to get our arms around a workable structure. Currently, the deal is severely overpriced and has some things that should be done to improve the property . This is great real estate with an iconic lakefront bar/restaurant. We’d look to partner with someone else who ideally had experience.

I know that’s a lot to unpack but we’d welcome:

-books/podcasts on buying businesses

-resources on bars/restaurants

-creative financing ideas

-and it would be great to speak with someone who perhaps has taken on something similar

Thanks!

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Henry Clark
  • Developer
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Henry Clark
  • Developer
Replied Jan 17 2022, 09:38

Just went skiing there.  Call the owner at Apache Lake in Arizona.  He built the place from scratch.  Don't sell or lease the extra land.  Location/Location- get the value out of it.  

This is a family or individual type business.  You don't want other people running it.  To many ways for cash, food, gas, liquor, cigarettes,  profits to flow out the backdoor.  Plus a local Bar/Restaurant is more about the owner/manager than the Bar/Restaurant.  When the cook or bartender is out, you have to cover.

With Covid, you need to get a deal.  Your cash flow is not a given.

I would back up and ask yourself what is your objective.  A lake Bar/Restaurant is a lifestyle investment.  Might be a great location and great deal, but does it fit your objectives.

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Jerome Adams
  • Rental Property Investor
  • Willingboro, NJ
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Jerome Adams
  • Rental Property Investor
  • Willingboro, NJ
Replied Jan 26 2022, 16:35

Hi Sarah,

Hope all is well! I've actually ramped up my journey into commercial real estate once I realized the similarities to business acquisition. It's really exciting pursuing once you realize the opportunities out there. I've actually just submitted a LOI on an engineering business(one of my niches) ,but I can tell it'll take some negotiating. I'd be happy to share some resources that might help if you want to shoot me a message. Would you be willing to share a little insight with me on the commercial market and what you've been seeing specifically with retail?

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Tim Delaney
  • Buffalo, NY
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Tim Delaney
  • Buffalo, NY
Replied Jan 30 2022, 13:56

@Sarah Montgomery be careful in trusting the numbers provided on a restaurant/bar - owners are notorious for claiming there is more cash than actually being shown and hiring labor that doesn’t show up on the books (not all owners, but many).

I would suggest buying the business and the real estate in separate entities with different financing structures- you will get better and longer terms on the RE than on the biz. But either way SBA financing should be considered for both (can be used in combination with seller financing as long as they are willing to take a second position). Even if you are going with purely seller financing you should go to a bank to get their take on it in case you ever need to refi. One thing that bank recommended to me when I bought commercial property with seller financing was to have a phase one environmental study done because most banks would require when I needed a refi and that way I would know before buying if there were going to be any issues.

I’d be happy to chat further if you want, just shoot me a message.