A Secure Future - Page 2 of 3

A Secure Future

liked and needed to put a deposit down. Wright tapped the equity in her brownstone and opened a $60,000 equity line of credit on an extended 30-year loan at a 6.75% interest rate. She didn’t want to take out a small business loan since she didn’t know exactly when her shop would be open for business. “I would have been locked into paying back the loan before I had money coming in,” says Wright, who held the cash in a money market savings account yielding 4%.

After several rent negotiations went sour, Wright decided to buy a second brownstone that offered commercial space on the ground floor. “It didn’t make sense for me to put so much money in just to be subjected to the whims of a greedy landlord,” says Wright. She discovered that the Neighborhood Housing Services of New York City, a nonprofit that offers affordable housing, was holding a lottery for five mixed-use buildings in the area. Soon after submitting her application, she found out that she was one of the lucky winners. Wright purchased a newly renovated building with two apartments and one commercial space for $560,000, but she received an $80,000 subsidy, a grant from NHS’ Store Work Program that reduced the cost to $480,000. She took out a 30-year $475,000 mortgage at 7%. “Having money ready to go made starting up faster,” says Wright. Total startup costs were about $110,000.

The cash register finally started ringing last spring when 70 coffee drinkers arrived for the grand opening of her shop, Common Grounds. Wright is proud of her accomplishment and grateful for the opportunity that the equity in her grandfather’s brownstone provided. “Home equity offered me the option of creative financing,” she says, adding that Common Grounds nearly breaks even some months–an achievement for a business less than a year old. She says she would clear about $7,000 a month if she worked at the shop full-time. Instead, she continues to work as an attorney. “I like to keep money coming in, and my employees know they can call me anytime if there is a problem.”

Wright’s Advice:
Show me the money. Borrow when you are in the best financial position. Wright knew her application would look favorable to the bank because she was bringing in an annual salary of $125,000. She also had a credit score of 750 and no major bills except a $121,000 education loan.

Plan ahead. Once Wright decided to embark on her coffee endeavor, she took all the necessary steps to ensure success: research, training, and financing. The latter will allow access to money before an urgent need arises. “That way you don’t have to accept the first thing that comes your way. You can shop around.” says Wright.

Buy as soon as possible. When you leave campus and take on that first job, don’t look for a place to rent. Look for a place to buy. In the long run, Wright says she would have been paying more money in rent.

Partner with your parents.