June 20, 2017 at 7:10 pm #86838
I received this question from one of our readers and thought it good to post in here. I’ll include my response below…
I am trying to purchase a golf course with my brother in law. It costs around 850K. We are willing to put down 150k-170K. Our credit score are in the high 700, meaning almost 800. We both own homes..mine is appraised around 320K and I do owe almost 90 K and my brothers in law is appraised 400K and he owes around 180K to the bank. We believe this golf course is worth investing in..
What our chances and ways to get a loan and where we could ask for one?
Thank you in advanceJune 20, 2017 at 7:11 pm #86840
This is a great question. The major thing here is that lenders will typically only lend up to 50% of your debt-to-income ratio. Your existing mortgages will go into this equation. So when looking for loans for a golf course, your 90k and your brother’s 180k will factor into the 50% allowable debt-to-income ratio, meaning that the max loan amount for the golf course is somewhere around 30% – 40% debt-to-income (these numbers are ballparked, you can calculate your debt to income ratio using this calculator)
This seems to be like this will be your only major hurdle. Still, with 20% down (~$170k), and with high credit scores, I don’t foresee lenders having a huge issue with your creditworthiness. As long as the 80% loan fits within your max 50% loan-to-value ratio, then you should be good to go.
When it comes to the types of loans, there are a lot available. I think the major step would be to figure out if you can purchase the golf course using a business loan or a real estate (land) loan, or both.
Further, if the golf course can be purchased using a real estate or land loan, you might want to check out our section on real estate investing.
Finally, if you don’t qualify for a permanent mortgage but still think the golf course is a good investment, you can use a short-term hard money loan to purchase the golf course and then spend the 1 – 3 years paying down the debt on your homes and meeting the other qualifications of a permanent loan, after which you can refinance using a long-term loan.
Of course, you should always consult with a professional before making a purchase decision.
Hope this helps,