Financing a Down Payment?

[rnorris88]

We're looking at a gorgeous historic building located smack on the main street of our small town, with a storefront and a 3-bedroom loft apartment above. Both store and apartment have been beautifully restored, and it's on the National Register of Historic Places. Initial asking price for the whole building is $265k. My husband and I currently own a 2-bedroom house valued at $72k, but we're worried about selling in time to jump on the store building. There's really not many other options for us in terms of buying, as the chances of a bank loaning us that amount without some money down are slim to none. It's a very tempting possibility, this place, with enormous potential for renting out the store/ opening something of our own someday (we're thinking an old fashioned ice cream parlor/soda fountain). Our first big obstacle is the big question: Where are we going to get the money?

Anyone have any ideas, hopefully something other than taking out a second mortgage on our current home? It's a lovely little house and we tried selling a few years ago, but it was a bust. People in this town want to rent like crazy, but not buy.

[Fulcrum]

I've got a question that should be considered before looking for the money.

Considering that the building is classed as an historic property, what limits are placed upon the owners in regards to maintenance and upgrades? It may be restored and in good condition now, but time will take it's toll and you will have to fix it. I've looked at historic properties in the past and turned them down when everything, aside from electrical wiring, must be kept like the original (single pane windows, no/minimal insulation in the walls, etc).

[Freelancier]

You can't get enough of a second mortgage on a $72K property to make it worthwhile.

If this is an investment property, expect that the bank will want you to come up with 25-30% for a down payment.

How long has the property been sitting? Can you get disclosures on it, specifically related to asbestos remediation?

If you're worried about losing the building to someone else, you can always write an option agreement on the property to give you time to raise the money, but don't do that if you aren't really clear on where you're getting the money.

And if you're thinking of living over an ice cream parlor and having kids, think again. The noise in the evening from patrons coming into the store after dinner when you want the kid to go to sleep will annoy the crap out of you.

[rnorris88]

That's what I was afraid of on the second mortgage. We were talking earlier, and decided to give things six months while we make a few improvements to our current house and put it on the market. If the building is still up for sale (which it probably will be), we're going to see if we can talk them down to $200k. The current owners only paid $60k for it, and there's no way they spent more than $100k on improvements, so hopefully at that time they will come down. If that's the case and we're lucky enough to sell our current place, we stand a better chance.

I'm not worried about the kids and the business downstairs, since it will probably be 5-10 years before we actually open up the shop. In the interim, we will most likely rent it out. There's time to figure it all out, the building's only been on the market for about a month. And at that price in this little town, it should stay right there.