Best way to finance new business/property? Time running out... (for sale, apartment)

[cupcakegurl]

Hi guys! This is my first post. I'll get right to the point, thanks in advance:


My uncle (my dad's brother) is selling his standalone commercial building in Port Hope, a quaint little resort town 1 hour east of Toronto. It is a convenience store with a 2 bedroom apartment on the 2nd floor.


Here are the facts:


-building is appraised at $225,000 and he is selling it to me for $210,000
-my uncle wants $100,000 cash up front and he is willing to do a Take Back Mortgage for the rest owing
-I don't have liquid funds, but I have approximately $200,000 equity in my house
-my annual income from my day job is $55,000 after tax (I don't plan to quit my job)
-my dad has been retired for 2 years, and is “bored” and wants to work/manage the store for my benefit (he doesn't need the money, he just wants to help his lil' girl get ahead)
-my father is an accomplished businessman (trading/exporting for 30 years and has owned/operated retail stores in the past as well) so he knows how to get things done
-he would be living upstairs in the 2 bedroom unit
-my uncle paid off the building a few years ago and doesn't owe a cent
-presently the building/convenience store business is being leased to someone in his church circle, this guy has been getting a good deal for over 10 years (he's been paying my uncle $1700/month to lease the store and $600 rent for upstairs apartment and my uncle has never increased it on him same price for over 10 years!)
-the guy NETS $5500/month from the store after paying my uncle his $2300/month (duh that's what net means lol)

-my uncle stubbornly insists on receiving the $100,000 cash up front, this is NOT open for discussion (trust me I've tried pleading to give him just $50,000 up front instead of the $100,000)
-annual property tax is $2,567 (so property tax + building insurance is about $4,200/year)
-no trust issues, my uncle, dad and I all share a very strong bond/trust


So my question is, what's the best method to give him his $100,000 and buy the store/building? I have no idea how much the real (after all hidden fees, interest etc etc) cost would be for a 2nd mortgage against my house, I'm hearing conflicting info on the true costs to pull equity from your home.

[AlsoNotMe]

There's a lot of redflags here in my opinion. Why is time running out? That's the biggest redflag. In my mind, you're rushing in a bit fast. Saving $15,000 off an 'appraised' value (appraised by whom, I wonder) hardly seems worth the potential headaches .

[Liberated in TO]

Why post on this on a forum? The cost of borrowing against your home are best discussed with a mortgage broker or your bank.

Also a commercial building with stable income would be relatively easy to finance up to 50% of it's value, so you may better off to get a 1st mortgage from a traditional lender, and give you uncle a VTB in 2nd position for the balance of the purchase price.

[katzpaw]

Get a 1st mortgage on the commercial property not a 2nd on your house.
Your post is unclear - who would be running the store - your Dad or the existing tenant?

[cupcakegurl]

Wow you guys are awesome.

I'll answer all 3 of you now, it's rather simple:

My father will be running the store, 100%. Like I said I'm not leaving my day job in Toronto, and he's bored out of his mind in retirement, and he's always been super-supportive (I will forever be his lil' girl) and WILL manage the store successfully.

Red flags? The only reason I said "time is running out" is because the offer has been on the table for almost a year now, so my uncle is waiting for me to stop procrastinating and decide before he lists it up for sale. He says he will list it at $249,000 and see how it goes (and I do believe him he's always been straight up).

My uncle is 72 years of age, he just wants to retire and move to SoCal.

Thanks again guys!