I would like to take over a restaurant/with apt attached with two partners, the owner is asking $400,000. fair

Asked by Jo Ann, New Berlin, WI Thu Oct 9, 2008

Fair mkt value $327000 on property. Taxes 5300.00 yr. We are considering offering $350000.00 a Land contract with $10000.00 down. We would like to mortgage this with a bank when the economy settles down. (perhaps in a year or so)
What would be a fair interest rate to offer. Is it true prime plus 3 points? Would $2500.00 a month payment be out of line? All partners have excellent credit cept one has "good" Do you think i am out of line? I DO NOT WANT TO SCARE THE SELLERS INTO THINKING WE DO NOT KNOW WHAT WE ARE DOING!

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Sharptrade’s answer
Sharptrade, , New Berlin, WI
Mon Aug 9, 2010
Jo Ann.
I am not knowledgeable of restaurant business or real state, but I am a day trader and therefore I am capable of providing a picture that makes sense to the investment you would like to make.
The real state market economy for the next 12 months is riddle with foreclosures and high inventories both existing and new properties. Real state prices are in decline and unless your purchase is done with a 5 to 10% loss of value from its current fair market value that is how much done lower you will be in your initial investment.
Lack of Jobs is a terrible uncertainty for a new start up in business, and unless your restaurant offers some different and unique dining, you will suffer the market conditions, mainly lack of business.
Good luck.
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Sally K. Han…, Agent, Elm Grove, WI
Tue Mar 31, 2009
Jo Ann...you need to talk with an agent who can act as a buyers agent and has had commercial training and experience...we do both commercial and residential real estate and as trained and certified buyers agents can illustrate the numbers to both you and your partners as well as the seller to make the offer make sense...there are more numbers needed than those you supply for determining the price. With an offer that features the kind of analysis that we can provide...you may know more about buying than the sellers do about selling.
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Deb Ram, , Minnesota
Sat Oct 11, 2008
I was a licensed realtor for 25+ years. If you are not embarrassed by your offer, you are offering too much, especially in today's market. I think you need to do a lot of research on the type of business you are entering into, I was also in the bar/grill business. This is a high risk business. I own a lake home in northwestern Bayfield county, WI. All the restaurants are for sale after the first year of new ownership. Sell time exceeds 5 years. Not your typical liquid investment. Good Luck.
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Larry Story, Agent, Greensboro, NC
Fri Oct 10, 2008
Jo Ann,
Now of course with a Land Contract your interest is going to be up for negotiation. So you and your partners need to sit down and decide on your ceiling.
Secondly, I use to own and run restaurants for almost 20 years. I still do some consulting on the side. The one and major factor you need to figure into your equation is your overhead for the startup. Not knowing your concept or menu you need to go into this with as little overhead and as much working capital as you can. As far as the payment that is going to need to be based on square footage of the site which you need to equate down to how many seats you have in the restaurant, what your check average will be based on the menu, and then with a rough draft P&L how many turns do you need a night to breakeven with all of your costs.

As far as the real estate side Yes I would say the $350,000 is a nice offer. First question though is the property free and clear of any liens? If not you need an ironclad way to make sure that the payments are going to be made so that in 6 months you are not shut out because the owner has been taking your money but, not paying any of his notes. I have seen it happen before.

If the fair market value is 327,000 though why are you offering 350,000. Is it because you want the Land contract. Maybe you should start a little lower.

Hope this helps,
0 votes
Jo Ann, Home Buyer, New Berlin, WI
Thu Oct 9, 2008
i've heard land contracts with interest up to 10% WOW, Is it crazy to buy in this market now?
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