3.
Re: Buying an office building question(s).... Jun 9, 2008 7:16 AM
in response to:
luxusmonk
I agree with Bridge as far as getting the down payment.
Do you and the building partners or practice partners have home equity to tap for a down payment?
Do you (and/or partners) have retirement plan funds with your current practice? You can each borrow against current retirement plansup to 50% of your vested balance, up to $50K. The funds will have to be repaid with interest over five years in equal installments, no balloons. If payments are defaulted on, the upaid balance is treated as a distribution subject to income tax and 10% early distribution penalty for those under age 59 1/2. Not, good, but maybe not the end of the world.
If you have retirment funds outside the practice, you may have some different opportunities depending on the amounts.
A local bank may be more willing to consider allowing the practice to borrow money against its cash flow to use as a down payment. The bank just has to know what is going on and will probably want the building loan too. Even if you don't get great terms for 5-7 years, you can refi when the loans come due if the bank is not competitive at the time. If you can get long term fixed rate term loans great, but not likely in this scenario.
Is the seller willing or in a position to consider carrying back any financing for a period of time?
My last comment is that if a well structured, reasonable scenario can't be worked out, the cost of "good" opportunity that is forced can be a lot higher than a missed opportunity.
Good luck. dublincpa [at] gmail.com if you have any questions.
