I'm purchasing a resort. Net income is about $85,000 and purchase price is around $850,000. I have 80% of the financing covered by a bank. The bank does not want me to do a PPM. I would like to borrow around $200,000 from an investor as a second position mortgage for 3 to 5 years plus and at sometime in the next few years do a cash out refi with the bank to pay them off. Has anyone done something like this? Is there any demand for loaning money in second position or is it seen as too risky and almost unsecured, especially since a resort is much more unique than a standard apartment? I'm trying to determine if this is something I can likely accomplish in the next couple weeks or if I really just need to bring on a partner to close the deal. Thanks for any feedback!
Investors would probably shy away as they won't have any type of "collateral" with this type of lending. It would probably have to be based off a deep existing relationship and trust with you.
I think your best bet is to bring in a partner as this will accomplish more of an alignment of interest among all parties.
Thanks @Juan Vargas ! Yeah I could see that being the case. The only people who I've brought the idea to are those that I have an existing relationship with. I don't mind bringing on a partner. My main thing is I want to hold it indefinitely and figure out an agreement where I can buy them out over the next several years.
That's definitely something that can be achievable but just make sure you lay it all out to your partner(s) and come to an agreement.
In larger properties and/or syndications investor capital (or part of it) is returned after x number of years but they are usually kept in the deal and not "bought out". If you do it this way and you come across another resort in the future guess who those investors will be looking to invest with..
@Jeff Lipple It sounds like what you're really after is an HML who will give you a loan with a 5 year term. I won't say that's impossible but it certainly isn't typical. So you have a long loan term, a second position on a mortgage, a resort that's a "business" rather than what we typically think of as a standard "income property", and it's basically unsecured. I can't imagine that a stranger (someone you don't know) is going to be comfortable enough with you and the deal in 14 days to make it happen. If you have someone that wants to be a partner with you in the deal I'd imagine that would make a heck of a lot more sense. Ideally, someone that knows how to run the business of a resort. It's pretty easy to hire a property manager (quality will vary) but with a resort you have pesky things like food, beverage, payroll, staff, etc. That's a materially different value and investment opportunity than an $850,000 apartment complex.
@Andrew Johnson you have the business as you describe and then you have the underlying real estate
as a real estate loan this is a non starter.
I suspect the ONLY way this happens is family and friends.. or cobble a bunch of credit cards together.
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