I wanted to see if anyone out there could point me in the right direction. I have some experience purchasing residential real estate, but none in the commercial space. My father has been in the bar business for 25 years. He has been running his current bar for about the past 8. The buidling's owner is in his 80s and wants to sell off his assests. Per the lease agreement, we have rights to purchase the building. The sellers would like to close this deal as soon as possible. The bar is located in the Central Valley of California, so we are not talking about millions here. Maybe around 200k or so plus closing cost. We are buying directly from the owner and not using agents. Who should I get to structure the purchase agreement? Should I use a Real Estate Attorney? What other options do I have? As far as financing goes, what is the best way to go? The way I see it, my options are a hard money loan. How much money down do Hard money lenders require? I can pull equity lines against my current properties, and then there is an SBA loan. Are there any other options? Any feed back would be greatly appreciated.
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@Zheath Sanchez Is the seller in such a hurry that you have to use hard money? That's a very expensive option. If seller financing is not possible try and get him to sit tight long enough for you to get your SBA loan or other more permanent financing in place. How about just a regular commercial loan through a local bank?
Without knowing more unless you are buying this at a significant discount and/or are 100% certain you have a solid refi strategy I'd avoid the hard money route.
And yes, any good RE attorney can handle the contracts. Should be relatively simple stuff. Just make sure you are doing enough due diligence on the property itself that you know what you are buying.
$200k in equity should be no problem. I would suggest an attorney who can draft everything and shepherd the deal across closing.
@Zheath Sanchez sounds like a good thing. All the advise so far is great. One thing stood out to me in your post, "seller would like to close deal asap", I would do some real due diligence on the building, check with the city building and planning departments and make sure that if ownership changes you can still run it as a bar. Usually when sellers are in a hurry there is a good reason. Trust but verify! Without knowing more about the property hard to give any more advise than get a good real estate lawyer and the city's blessings and go for it. Good Luck!
Go get a building inspection and report before the deal. Check the roof, check everything and sewage lines.
What about the alcohol license and all those permits and papers. Transfer of building stuff. I have no clue. Ask a lawyer 1st. Ask now. Go this week. Pay for one hour of service. About $300. Write it off as business expense.
I am in Central Valley too. Cali.
Hey Zheath, sounds like a good opportunity. I think a conventional or SBA loan is the way to go. Usually, SBA specialists can also handle conventional so if you find a good one they can lay out your options and you can figure out which one is best.
If you don't want to use an agent, definitely use a real estate lawyer. The cost to use them is less than the potential hazards that can come without using them. However, you can probably use a commercial agent, they would most likely be cheaper in the end. Good luck!
Where is the bar?
I would like to thank everyone who replied to my post. Lots of great advice! The building is located in Modesto California. My father has been running the bar out of the building for the last 8 to 10 years so as far as the license, and permits go, it’s already up and going. My father is not the most organized businessman in the world, so as far as getting a small business loan goes, I think getting the paperwork in order is going to be a bit of a challenge but totally doable. I will definitely look into getting a real estate lawyer to structure of the deal. Z
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