0% Down on Hotel?

Question

Hello,

I am looking to buy a hotel in Washington, DC that is for sale. We are also considering a few other properties in simliar large cities with solid net operating income and good annual occupancy (60% or higher). My family has started a coporation last month in NY and we have no assets or income flow. We are looking to find a hotel loan for 6.5% for 85% of the cost and then find a second loan for the remaining 15%.

We have considered issueing stock instead of a second loan. We are worried that if we use this method, someone would buy more than 50% of the stock and take control of our coporation and aquired assets.

What would someone recommend be the best way to aquire our first hotel? We believe that this will be the toughest purchase and the rest will be easier after we have established creditability. All the prospective hotels have been in existence since at least 1998 and have all financials.

Thanks for your help,

lemonpiesaregood

Answer 1

Buyer beware, 0% down. If your business is a corporation or a limited liability company (LLC), you can escape personal losses if your business fails. This is the main reason why businesses go to the time and expense of incorporation. But even an incorporated business owner's assets could be at risk. Some lenders, creditors or landlords require personal guarantees from small and emerging companies before extending credit or awarding a contract. Such a personal guarantee exposes the guarantor's personal assets (house, car, savings) if and when the business goes under or the financial obligation is defaulted.

As for losing your interest in the company by issuing stock, the difference between a public and a private company is that a public company is one whose stock is traded by the public, e.g., listed on an exchange such as the New York Stock Exchange or NASDAQ. A private company is one whose stock is generally held by one shareholder or a small group of shareholders, which you control and choose to whom and how many shares of stock to issue. However, if you're planning on funding the venture by issuing shares of stock any interested investor will most likely want 51% of the oustanding shares, thus retaining control of the business.

Answer 2

we have no assets or income flow

GOOD luck