How to Read the Funding & Profitability Sections

This guide explains what you are looking at in the calculator: the comparison between a standard purchase, the creative investor + seller structure, the seller-held second mortgage, and how net income to you as the buyer is calculated after debt service and extra unit income.

What the “Standard” and “Creative” Columns Mean

Standard Purchase

• Purchase price / loan / down payment: The standard side shows a normal commercial acquisition. The lender funds the first mortgage at the chosen LTV (for example, 65%), and the buyer must bring in the entire remaining equity as a traditional down payment.
• Closing costs: Typical buyer-paid items—title fees, lender fees, recording, legal, etc.—are estimated as a percentage of the purchase price (for example, 2.5%). These are added to the cash needed.
• Buyer pre-close cash in: This is your risk capital before you own anything: appraisal, inspections, legal review, LPS structuring fee, and the good-faith deposit. In a standard structure, these are simply part of your total out-of-pocket.
• Buyer cash needed at closing: This is the down payment plus closing costs, minus whatever you have already put in before closing. It shows how much “new money” you must bring to the table on closing day.
• Seller net cash at closing (standard): This approximates how much cash the seller walks away with at closing after paying off their existing mortgage and customary closing costs, without any creative second mortgage or credits beyond normal practice.
• Seller-carried second (standard): In the pure standard scenario, this is usually $0 because the seller is not financing any part of the deal.

Creative (Investor + Seller Option Buyout)

• Investor-funded down payment: Instead of you writing the check for the down payment, an outside investor funds that amount into the restaurant/operating entity. Functionally, this allows you to acquire the property with little or no traditional down payment.
• Investor payoff at closing (down + premium): At closing, the seller buys the investor’s options in the business for the amount of the down payment plus an agreed premium (for example, 10%). The calculator rolls those two pieces together as the “investor payoff at closing.”
• Seller credit toward costs / reserves: The seller agrees to cover closing costs and to fund operating reserves for you via credits on the settlement statement. This is what allows your appraisal, inspections, legal, LPS fee, and deposit to show as reimbursed.
• Buyer cash in before closing (creative): This is the same set of due-diligence items as in the standard column, but in this structure they are designed to be credited back to you at closing out of seller credits and the way funds flow.
• Buyer cash needed at closing (after reimbursements): In the ideal version of this structure, this line goes to $0—meaning you do not bring any additional new cash to closing beyond what you already advanced for due diligence.
• Operating reserves for buyer at closing: After closing costs and reimbursements are covered, any remaining seller credits are allocated to you as working capital. The calculator shows how much you could walk away with in reserve, typically targeting at least 6 months of operating runway.

How the Seller Note and Seller Net Proceeds Work

Seller-Held Second Mortgage

• Principal amount: By default, the seller-held second is set equal to the investor payoff at closing (down payment + premium). That means whatever the seller pays out to the investor at the table, they “get back” by taking a second mortgage from you for the same amount.
• Adjustable amount: The calculator lets you override this number. If you and the seller decide that only part of the investor payoff should be rolled into a second mortgage, you can type in a different principal amount and see what happens.
• Interest rate (example 6%): The explanation section assumes a 6% interest-only structure on the seller-held second. That’s not a requirement, just a simple way to show the seller’s interest income and your monthly payment to them.
• Interest-only illustration: The annual interest on the second is calculated as:
  Seller Second Principal × 6% The monthly interest is that amount divided by 12. In practice, you could structure the note as amortizing, interest-only for a period, or some other custom structure.

Seller Net Cash After Existing Mortgage Payoff

• Step 1 — Seller gross equity: Start with the contract purchase price and subtract the seller’s existing mortgage payoff. This shows the seller’s total equity in the property at that price.
• Step 2 — Pay the investor: From the seller’s equity, subtract the investor payoff (down payment + premium). This is the cash the seller uses to remove the investor from the deal at closing.
• Step 3 — Apply seller credits: Subtract any seller-paid credits (for your closing costs and reserves). Whatever is left is the seller’s net cash at closing.
• Step 4 — Add the seller-held second: On top of their net cash, the seller is also leaving the closing table with a note receivable (the second mortgage). So their true economic position is:
  Net cash at closing + face amount of the seller-held second + ongoing interest income.

How Net Income After Expenses, Mortgage, and Insurance Is Calculated

Step 1 — Start With Net Operating Income (NOI)

• NOI (annual): The calculator assumes an annual NOI figure. This is your income after normal operating expenses: taxes, insurance, utilities, basic repairs, management, and other property-level costs. It does not include mortgage payments or distributions to owners.

Step 2 — First Mortgage Payment (Interest Illustration)

• First mortgage principal: This is the loan amount based on the selected LTV (for example, 65% of the purchase price).
• First mortgage rate: The calculator uses the input interest rate (for example, 7%) to compute an interest-only payment for illustration:
  First Mortgage Principal × Interest Rate = Annual interest Then divided by 12 for a monthly interest amount.
• Note: In a real underwriting, you may have amortization and principal paydown. Using interest-only in the model keeps the math simple and conservative for cash flow purposes.

Step 3 — Seller-Held Second Payment

• Second mortgage principal: This is the seller-held second note. By default it matches the investor payoff, but you can adjust it.
• Second mortgage rate (example 6%): As with the first mortgage, the model illustrates interest-only payments:
  Second Mortgage Principal × 6% = Annual interest Then divided by 12 for the monthly interest.

Step 4 — Net Income After Total Debt Service

• Total annual debt service: Add the annual interest on the first mortgage and the annual interest on the seller-held second:
  First Annual Interest + Second Annual Interest.
• Net income after debt (annual): Subtract total annual debt service from NOI:
  NOI − Total Annual Debt Service.
• Net income after debt (monthly): Divide the annual figure by 12. This shows the approximate monthly cash flow left after paying both lenders.

Step 5 — Additional Income from #704 and Upstairs Events

• Side unit #704 rent: The model allows you to enter a monthly rent for the #704 storefront. If left blank, a default of roughly one-third of the total monthly debt payment is suggested as a target rent. This amount is converted to annual income and added on top of your net cash flow.
• Upstairs events / parties net: You can enter an estimate of the net monthly profit from upstairs events, private parties, and functions. This is also converted to an annual figure.
• Total additional income: The annual and monthly totals for #704 + upstairs are shown separately so you can see how much they improve the deal.
• Net to buyer including extra units: Finally, the calculator adds the extra annual income to your net income after debt:
  Net After Debt (Annual) + Extra Income (Annual) and then shows the monthly equivalent. This gives you a realistic view of what the deal can throw off once all spaces (#702 restaurant, #704 side unit, and upstairs events) are producing.