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I have an LLC, and I am interested in purchasing a building…

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I have an LLC, and...
I have an LLC, and I am interested in purchasing a building for my existing business. Opened for 2 years. I pay almost 1500.00 ea month for rent, and I feel I'd be better off buying a building, and I've found one that would be perfect. The building itself isn't in great shape, but the location is prime. It is owned by a credit union. I'm wondering, what kind of down payment would I need, or do they take a loan against my equipment, and what if I switch my banking to them? Would that help to get approved for the mortgage? And, would it be reasonable to assume that wherever the mortgage comes from, that they would allow extra money for remodeling? The asking price is 150K, but I think it's worth 200K!
Submitted: 8 months ago.Category: Finance
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Customer reply replied 8 months ago
i posted this several days ago.... no responses
Answered in 8 days by:
9/16/2017
Financial Professional: Emilee Weaver, Certified Public Accountant (CPA) replied 8 months ago
Emilee Weaver
Emilee Weaver, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 90
Experience: VP, Director of Finance
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Hi there! I just got back from out of town, and I can help with this question.

So, for most commercial property loans the down payment requirements are going to be a little higher than on a residential property, usually 25% at a minimum and there are some lenders who will loan you some additional funds for the renovation project, although your choice of lenders will be more limited than if this were a residential property. Also, note that your interest rate is going to be higher than what you would have on a residential loan, in the range of 1% to 2% higher. Keep that in mind when you are calculating your expected payments.

However, if you have the funds for a down payment $30k to $40k and can get the building in working order, you could definiely save some cash flow over your monthly rent and would be building some equity, so sounds like a good option!

The lending process will be very similar to that of a traditional mortgage in that they will want to review all of the business financials ( and if you are the sole LLC owner, then likely all your personal finances as well). The building will have to pass title, appraise for the right value, etc. just like a traditional mortgage.

I would start with whatever banks you already work with and see what they offer first.

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Financial Professional: Emilee Weaver, Certified Public Accountant (CPA) replied 8 months ago

Oh, another big item is that they will want to see that you have cash on hand to cover the mortgage, taxes & insurance - I have seen requests of anywhere from 6 - 12 months of reserves on hand. So keep that in mind as well.

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Customer reply replied 8 months ago
Ty!!
Customer reply replied 7 months ago
I have been trying to rate this for you to get paid since the day you responded! I am trying again...
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