Bank Foreclosure

[Gatorpossum]

First time on here so here goes. My wife and I have been wanting to purchase a bar & grill for about a year now and the one we would really like to have just came up on the market. The details are this: The original owner sold the bar a few years back when the place was the hottest spot in town. There is only one other place in town to compete with. The people who bought the bar lost it to the bank. I would like to buy it but only have 10% of the asking price and that would leave me with no working capital other than my monthly retirement money to run the place with if things got bad. It would be a dream of our life time to own it.

The next piece of the puzzle is that the bank said they wanted a lot of money for the place or maybe they would get it up and running so it could be sold. I would like to pursuade them to let us do that for a year so that I could get more money for a larger down payment. Does anyone have an idea on pursuading the bank to allow us to lease it? And yes we both have experience and business degrees. Just can't seem to get the bank to talk to me. One problem is the bank president is drinking all the inventory thinking it's his own private club. It has been closed a few months now and hasn't been cleaned or anything. I need to get in there before it's not worth anything. Any help would be gratefully appreciated and I'm sorry for such a long post. We want this place badly. Thanks again, Gatorpossum

[Michael Black]

What is the asking price? I don't want to rain on your parade, but unless you can come up with much more money on your end, I think it is unlikely. This is the reality of the situation. What are you putting up beside your business degrees? No significant capital?, no business plan?, no many years of experience operating a bar? Put yourself in the Bank's position who is in the business of very safe returns on their money. How bad do you want it? Are you willing to put your home up to finance it if you have one? Can you get family, friends, investors? And why did the former owners lose it to the bank and what will make you and your wife so different? Why is it no longer the hottest spot in town? Keep in mind that you are also doing this during the worse time for anyone, even seasoned top operators, to get money or backing from any bank.

Welcome to the board. Maybe someone else has some insight and a miracle solution, but I think you need a solid plan, someone experienced to help you execute that plan, and most of all a bunch of money to make that plan a reality.

[Gatorpossum]

Thanks for the quick reply. The asking price is $700,000. Like I said I've got 10% cash and have four other peices of property, car & motorcycle collection and tractors nothing owed on anything. I don't have any family and any friends that I have borrow from me. The former owners bought too many toys and such and didn't spend any time there and had the attitude that they were better than the people they were serving. The thing that would make my wife and myself different from them is that we already have houses & land and all the toys we need and are willing to spend every open hour in the place until it pays for itself. I realize it is one of the worst times in history to get a loan on anything, let alone a bar. The reason I'm on this site is to try to pull together some creative realistic Idea's to possibly throw down some cash for a deposit and lease it until I could get enough to purchase the place. Or if I couldn't for some reson breath life back into the place I could walk away and maybe just loose the cash that I have. Thanks again Gatorpossum

[Daryl]

I am with Mike on this. My first reaction was why was he foreclosed on? Many things can happen to people and for one reason or another they are in a bad spot. But money sounds like the problem in this case. Was the place profitable?

Also, who holds the liquor license to the bar? Was it collateral with the bank?

The bank may also be in a less than desirable position also. Non performing assets right now are trouble for a lot of banks. And it is my understanding the Federal regulators are hot on banks to clean up their books. (Second hand knowledge from two community banks here in Tampa)

However, it could be a possibility to get creative with the bank and try to remove the burden from them. (the bank president could still drink from your inventory :)

How expensive of a place is this? How many staff etc?

[Gatorpossum]

It was doing about 1 million gross. They lost it because they were not there enough and bought too many toys. The bank took it in june and its been closed every since.
The lawyer said if I had $700.000 I could have it. I only have $80.000 in cash but I owe nobody anything. The bank is supose to have the lic. thanks gatorpossum

[walawdog]

The number one cause of bars/restaurants failing is not enough working capital. You are putting yourself in this position to start with. Perhaps no matter how badly you want this particular spot...if the numbers don't work in your favor, pass on it.

[Gatorpossum]

Thanks for all the replys, I've been trying to respond but for some reason they will not show up. so here I go again. Since I have a little more than 10% in cash could anyone think of a ceative way that we might be able to lease the place. I have no debt good credit four peices of property and steady retirement income. I was thinking maybe a deposit of 3 months rent and go from there. would that be an unwise Idea. thanks again

[Michael Black]

Well I assume you have read through some of the case studies here on the board and know what you might be in for and many of us would discourage you in this situation.


But, if you want it that bad, a) I would think that you would need at least another $60,000 for 20% and preferably $231,00- 350,000+ (33-50% or more) and quite possibly your toys on the line or b) have a great business plan and beg them for a land contract like deal where if you don't make high payments like a high interest loan say on 3-5 years and not 15,25, or 30. You use the $80g as working capital, but if you miss one monthly payment at midnight, you lose the bar and everything back to them. The get their full asking price, still have what they have now as collateral, and now higher than normal interest. But, the banks would probably like to get all their $ now even at a discounted price because they are not in the high risk business or the business of wanting to hold these types of assets long. They want that money to work with and loan on very safe investments. Toys on the line, what about your property/home? Are you willing to bet the farm, because that is the only way I see you even stand a small chance of getting this bar. This is the reality, don't live in reality denial. Are there any smaller, less expensive bars to get your feet wet in first? Someone once said "you can't always get what you want, but sometimes you just might get what you need."

PS- $700g for at best $1mil gross is not great. There are places you can get or build for less than 1/2 of that and gross and profit more in my opinion. You could have 2-3 decent size places at less risk than with the $700g. Heck, you could have 5-10 small bars at that price and only initially be risking your $80,000 w/o having the Devil on your back each month. I know you want this bar, but that would be smarter given your experience and money.

[Gatorpossum]

Thanks again Michael, I was thinking it was to much. I will look for a smaller place and hopefully find one. I'll keep dreaming that maybe the bank will cut the price where it might be affordable just to get it off of the books. Thanks again Gatorpossum

[GreedoRothstein]

Sorry I'm a little late ...

What you need to do is this:

Find out:

Why was the bar unable to make bank?
- What caused their downfall?
- - Was it a poorly managed place or was the traffic not there? Why?
- You may find a problem you cannot overcome.

The best way to do this is find the last owner and pay for his consult.

Find out how many other business in the vicinity want the bar back.
- If they made it difficult to operate, stay away.
- If the empty venue is causing them woes ( a business in disrepairbeside theirs
usually is bad for their business, even if they are a nightclub, too )
then you may find some QUIET PARTNERS aka INVESTORS who want
to see you do well.

Then, and only then, determine how much the bank LOST due to the failure
and offer 50% of that. The worst they can say is "no".

The best thing to do is contact the owner who used to run it and pay for his
consult.


Having the former owner as an associate will reveal things that will cost
you more in TIME and STRESS than he can tell you right off.

[Gatorpossum]

GreedoRothstein, Thanks for the reply, but I already posted that info.

[seandell]

You had mentioned you had experience and I'm hoping that is Restaurant experience. Like years of it! Because if not it is really unrealistic for you to head into a venture of this size. Your marriage and lifestyle as you know it now will suffer.

Ive been in the bar business since I was 16 and love it however it is not a lifestyle for everyone. Think 60-80 hours a week. Stress from city services to sales people. Employees who you thought of as family stealing from you, I could go on and on.

If you are set on opening a place, start smaller.I just opened my place, a small saloon for under $200k and I own everything except the building. No loans = less headache.


Don't risk your life savings, your toys etc on this. Even with 80k down you are personally going to be on the hook.

Good luck

[Gatorpossum]

Thanks for the reply Seandell, My wife has worked in the biz since she was 16 as well. The only problem with getting a smaller place is I don't want to drive to another town. I want to stay where I live. I've known everyone here my whole life. Thanks again, Gator

[MMorgan]

Your property, are they all houses? You also say that you own all of this out right, which means you could pull a reverse mortgage on one of your prop, which means just that, you will be paid instead of pay a mortgage on your property, at the end of the contract period the land will go to them. However, that could help you weather the payments needed to the bank if you were to put the pedal to the metal go for it. In terms of 3-5 year bank loan.
~MMorgan

[allanjustallan]

Check this out, http://www.fastbusinessvaluations.com/biz-valuation-formula/bars.htm

The business you are looking at is overpriced,

Allan.

[Warehouse]

Alan,
The referance you cite "Fast business valuations" only refers to the value of the business itself with no consideration for the value of the REAL ESTATE. Depending on the size of the property,it's location,growth potential, various assets etc.,it could be a bargain.
Don

[Gatorpossum]

The property itself acording to tax records is worth $400.000. I do not want to get rid of what I own I would like to leave it to my son. Thanks for the replys

[allanjustallan]

True Don,

But its a good starting point,

Allan.

[allanjustallan]

Not sure if this would be helpfull,

http://www.diomo.com/course.html#12

Came across it while surfing the web,

Allan.

[Gatorpossum]

The place is still there with noone jumping on it. just thought I' tell you guys for an up date and maybe you might have a fresh Idea thanks, Gator