Shifting from Leasing to Ownership

February 17, 2022

Our Florida client contacted us, ready to shift from leasing to ownership of his hotel. He currently was leasing the land, but had built up enough management experience and capital to own his hotel outright.

GRP Capital Managing Director Krishan Patel was ready to find him an appropriate lender. Patel stated, “Our client was an ideal candidate for financing his transition to being a full owner of the property. He demonstrated strong management skills at the current property.  In addition, he had sufficient capital  for his equity injection. He was organized about every aspect of ownership and management. This included being hands-on with his financials and hotel statistics, as well as understanding the hotel business and his local market conditions. We were pleased to find him stable, permanent financing.”

Moving from Leasing to Ownership? 

• Demonstrate strong management: Make sure you have accurate financials. Organize all of your paperwork about your operating company. Create a new company as the borrowing entity if you need to. Finally, prepare a budget for the current year and a proposed future budget.

•  Know your property:  What are the strengths and challenges of your property? What are your future plans if you take on ownership that you couldn’t do previously? How is your property positioned in your local and regional marketplace?

•  Evaluate your current debt:  Will you be able to make new, larger loan payments? Do you have a recent SBA loan, like an Economic Injury Disaster Loan (EIDL) or a Paycheck Protection Program (PPP) loan? If so, the lender may request you to pay down, pay off or subordinate your  loans. Lenders may also require you to apply for and receive forgiveness for PPP loans.

•  Why do You Want to Own? Many business owners like the prestige of ownership as opposed to renting. This is understandable, but it may not be a good enough reason. Ownership requires being able to make major repairs. Is the property currently well-maintained or will you be obligated to take on a lot of deferred maintenance projects?

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research  the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. If you are considering becoming a first-time (or second or third time!) buyer, we can help. Or if you want to investigate refinancing, we can assist you.

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