ForumsFinancing Tips

Up to All Forums

This Question is Possibly Answered

1 "correct" answer available (5 pts) 2 "helpful" answers available (4 pts)

11 Replies Last post: Aug 14, 2008 11:39 AM by Milleisen

Requirements for MultiMillion $ International Loan

Aug 7, 2008 8:49 AM

kirghizstan 6 posts since
Aug 7, 2008

Ok so I have found an international hotel/resort that I'm interesting in buying. It is a smaller family run place that I am conservatively estimating a gross income of $3 million per year. I have not seen the books yet, so this is all just the very beginning stages of the possible offer/purchase process. The business is for sale for $6.5 million. The business loan would have to be for the whole thing and probably more if possible to give some working capital to start with. Is obtaining a loan of this sort even possible in my situation? If not what type of financial backing would be required for this type of purchase?

A little background on myself. I am still in my 20s and while I own a house, I just bought it last year so i don't have much equity in it. I am a highly educated individual currently in the actuarial field. Personally I have my reservations about this being possible, but if it is I would do it in a heartbeat, assuming that the books show it is a profitable business.

Tags: Report as inappropriate

Milleisen 129 posts since
Aug 6, 2008

1. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 9:15 AM

Hi Kirghizstan - The first thing you need to do is take a look at the last 3 years of financial statements and get an idea about the true profitability. You need to understand whether the business generates enough cash flow to support the purchase price. If it doesn't, make your own valuation of the business and make an offer based on that. Remember that an asking price is just that. Recent real estate events have reminded investors that real estate MUST be tied to cash flow, and not just depend on comparable sales. If you need help, I specialize in financial statement analysis, valuation, and projections. My contact info is on my profile if you want to have a free consultation.

In general, a bank will not finance 100% of the purchase. You'll need to find a way to come up with 20-25% of the purchase price. Banks are not going to shoulder ALL the risk, you need to have some "skin in the game" too. If you don't have the cash, you might want to consider some minority investors. I'm sure your feeling is that you found this deal, so you want it to be yours and yours only, but if you have no capital to put into the project its highly unlikely that it will work out without some help. You'll need to be open to giving up control if you want a realistic shot at making this happen.

If you are going to solicit investors, you'll need a business plan. I've seen a number of posts on this forum from people who can help you with a business plan (see many posts by Luckiest). The business plan is a good tool for you to work through questions that will come from investors/lenders. Things like who will run it, how you want to finance it, who you compete with, what opportunities exist, and what projected cash flows wil look like are all things that you need to decide before you seek financing from others.

Report as inappropriate

kirghizstan 6 posts since
Aug 7, 2008

2. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 9:29 AM

in response to: Milleisen

I will tackle a couple of your points quick, I just said the asking price because well, it is more conservative to say that then to assume one can negotiate any amount lower. Being in the actuarial field I understand that cashflows must be matched to make any business profitable so there would be no way I would over pay. I am not against investors, now finding them might be an issue, but i'm not against it, heck I almost expect it. Business plan, another one of those things I expect to do, or work with someone to do.

I actually already requested the last 3 years of financial information, but the real estate agent responded that "The owner will reveal details only to potential buyers coming over to visit" the property. Personally, I would prefer not to travel to this location without having this basic information, because flights to this location are limited and don't leave every day requiring staying a few days. The trip would end up costing close to $4000 per person, which would be a supreme waste if I get there and see books that show the property is losing money.

Report as inappropriate

Milleisen 129 posts since
Aug 6, 2008

3. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 10:15 AM

in response to: kirghizstan

I've looked at potential real estate investments and had the "you have to come see it first" card played on me. If you've conveyed to the agent that it's cost prohibitive for you to just fly over there with no indication of the profitability, there's not much you can do. If they are a motivated seller, they should understand this. The only other thing you can do is demonstrate that you are a serious buyer. This would mean explaining how you'd plan to make the purchase, and offering proof that you are a strong buyer. Given your current situation, it's possible that the seller doesn't thing you'll be able to come up with the financing needed to make the purchase.

I'm always looking for real estate projects, and have scoped out motels from time to time...if you are ever interested in looking in New York, we should talk. Starting small with a partner could be a good way to get started.

Report as inappropriate

kirghizstan 6 posts since
Aug 7, 2008

4. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 10:35 AM

in response to: Milleisen

I actually haven't responded to their response of only giving information if i come to see the property.

I actually live only a couple hours outside of new york city, but I am really interested in international hotels in developing markets, such as costa rica, french polynesia, etc. These are markets I feel are becoming more available to the masses and even though there is a downturn in the travel market, they have probably hit their low point in my research.

I am looking for investors, so if there is anyone who is looking for this type of invest me feel free to let me know. Any ideas of where to look for investors interested in this industry?

Report as inappropriate

Milleisen 129 posts since
Aug 6, 2008

5. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 11:57 AM

in response to: kirghizstan

Communication is always key in real estate deals. It might not hurt to tell the agents that you won't physically look at a property until you know it's a viable investment. You don't have anything to lose by doing that.

GoBig Network (GoBigNetwork.com) has a marketplace for investors and business owners to hook up. I've never used it to raise capital, so I'm not sure how much luck you'll have there but it may be worth a try. I understand your ultimate goal for international hotels, but realistically speaking you might need to learn to crawl before you walk. In other words, it might be worth it to invest in a good old fashioned mom and pop hotel/motel in order to learn the business and more importantly, establish a track record as a motel owner and operator. I know thats not as glamorous, but it's a way to start out if you don't have capital or experience, as these deals tend to avail themselves to the seller holding notes.

Report as inappropriate

kirghizstan 6 posts since
Aug 7, 2008

6. Re: Requirements for MultiMillion $ International Loan Aug 7, 2008 1:37 PM

in response to: Milleisen

I emailed the agent requesting the information.

As for getting my feet wet I have a sister-in-law who has (and currently is) worked in management at 2 major hotel chains and has worked on multiple hotel openings, but I am holding off on her help until we actually get close enough to the point where i'm traveling to the property to view it. I first want to find possible (not definite) financing and determine if the purchase is worth it to both me & the investor.

I looked at that website you recommended, it seems interesting, have you seen others that you would recommend.

Report as inappropriate

Milleisen 129 posts since
Aug 6, 2008

7. Re: Requirements for MultiMillion $ International Loan Aug 8, 2008 8:42 AM

in response to: kirghizstan

If your sister in law is going to be part of the management team, I think you need to bring her into the fold sooner than later. Having a seasoned hospitality professional on your team will help your chances for financing. You'll need to have your ducks in a row before a bank will give you any positive feedback on a potential loan. If you haven't thought through and nailed down each and every detail, they are not going to take you seriously. A business plan to sumbit to a lender would be a good start. They will want to know all that info, so pre-emptively delivering it will save lots of time.

Not sure about any other venture capital websites. I'm sure a google search would turn something up. Any funding source will also want to see your business plan. Especially with an investment in foreign real estate, you need to have worked through all the issues.

Report as inappropriate

kirghizstan 6 posts since
Aug 7, 2008

8. Re: Requirements for MultiMillion $ International Loan Aug 8, 2008 9:27 AM

in response to: Milleisen

I agree about the sister, once i get a chance to review financials I will make a high level assessment and if I am happy with what I see then I will talk with her about the property.

Report as inappropriate

LoanGuru 10 posts since
Aug 12, 2008

9. Re: Requirements for MultiMillion $ International Loan Aug 12, 2008 4:22 PM

I would like to learn more about the hotel I can help you get the get the financing you need to buy the hotel but I need more financial information about the business. If you get 3 yrs financial records on the hotel or if you have a business plan for the hotel I could look at I would be glad to help you. You can contact me at natalie@ecardcorporation.com

Report as inappropriate

kirghizstan 6 posts since
Aug 7, 2008

10. Re: Requirements for MultiMillion $ International Loan Aug 14, 2008 9:24 AM

in response to: LoanGuru

Does anyone have suggestions of banks that do these types of loans? I am still trying to build a business case for purchase and I would like to have that information in my business case. Thanks

Report as inappropriate

Milleisen 129 posts since
Aug 6, 2008

11. Re: Requirements for MultiMillion $ International Loan Aug 14, 2008 11:57 AM

in response to: kirghizstan

If its in another country, you'll need to deal with a bank in that locality, or a global bank like BofA, Citi, or Chase. Local people will be able to put you in touch with lenders down there if they see you as a legitimate buyer. If not, you'll get the runaround.

Report as inappropriate

ForumsFinancing Tips

This Question is Possibly Answered

Requirements for MultiMillion $ International Loan

Aug 7, 2008 8:49 AM

More Like This

Most Recent Forum Posts

Legend