HELP! I CAN’T LOSE THIS ONE!!! - Posted by Nate
Posted by Nate on November 30, 1998 at 15:52:58:
I would appreciate anyone’s advice on this property…
I have recently found a 7 plex in my hometown, with a seller that’s fairly motivated.
It has an existing mortgage of 141,000 @ 8% being held by the original owner (70 year old man who had owned it for over 40 years)
The current owner (seller) would like cash for another business, but is willing to carry some of his equity in a second. I originally made him an offer, and this was his counter (not bad at all)
Keep in mind the tax assessed value is about $182,000
$169,000 sale price
$3,000 credits for deposits
take back note for $159,000 at 8.75% balloon in 10 yrs
Not bad. This property brings in $2500 a month in income and only about $422/mo in operating expenses. Even after debt service (mortgage payments), and a 5% vacancy rate, I would have a NICE positive cash flow here.
After I got this counter offer, I got a bright idea and offered him the following:
$185, 000 Sale price
-18,000 "improvement credits"
141,000 assume original mortgage at 8%
-2,900 credit for deposits
-2,122 credit for rents (prorated to close on 4th)
-250 credit for taxes for 2 months
20,228 CASH DOWN
You can see, by getting him his cash at close versus having him hold a mortgage, I actually would be buying the property (185,000 tax assessed value) for about $161,228 (141,000 + 20,228). He accepted this offer in a flash.
My trouble has come with trying to get a second mortgage…my plan was to get a second for $32,000 and give him his 20,288. This way, I would walk away with about $12,000 at close, and have financed the property for 173,000 total (141,000 + 32,000).
That’s great, but I can’t find anyone who will do a second and I can’t find anyone that will lend more that 75% LTV on a commercial property (if I wanted to just refinance it all together). I thought I had it all worked out, only to find the financing to be a big obsticle. This is my first deal so I’m a bit flustered…
Is there a better way to buy this property?