How Do I Know What I Am Able to Afford?

I got a phone call the other day. Actually, I sent an email to this business owner who I had met probably three or four years ago.  We were talking a year ago about how he wanted to eventually own his property. I gave the advice I’ve given at other times: prove your concept first and come back to me in the future. There’s always time to own your own commercial property. and it makes great wealth creation sense for you. I put a ticker on my calendar and I reached out to him by email and he called me back. It was about six months before his lease was up and he told me exactly when his lease was up. I often tell people about six months prior to your lease being up is when you want to start shopping. First, get yourself pre-approved with financing so you know what to go shopping for. You don’t want to go shop for a $3 million office building if you can only afford a $300,000 office building. It’ll waste your time, it’ll waste your lenders time, and if it’s me, it’ll waste my time, and I don’t like that.

I reached out to him and he said, “Wow, just like clockwork. Six months ahead of time. This is great! What do I need to do?” I went through the whole process with him and I said we’re going to need to look at three years of business tax returns and three years of personal tax returns. I’m going to have to look at a personal financial statement, as well as a current interim financial statement on the business. I’m going to have to get a business debt schedule, as well as get authorization, or at least your credit, so I can pull your credit. I actually know your personal obligations–your personal debt schedule–so once I can do all the analytical work I can go ahead and structure the proposed financing for you and tell you exactly what you should go shopping for. He said, “That’s great.” He got me all of the information. We went through all this and it turns out that he’s got a piece of property that he’s looking at across the street from where he is currently. It’s a great situation for him, but what’s interesting is, we were starting early enough in this process to give him plenty of time to get his pre-approval and financing lined up and to go search for things. It’s not very often that somebody finds something literally across the street, but in this case, he actually did, which is pretty interesting.

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