New Deal, HELP!!!! - Posted by Letisha

Posted by JOB on July 31, 2008 at 13:17:40:


New Deal, HELP!!! - Posted by Letisha

Posted by Letisha on July 30, 2008 at 12:45:46:

Hi, everyone. First, I love this site. Also, thanks in advance for any help, I need it. I’m an aspiring investor working on my first deal. I have a 2 8-Unit 2Br/1Ba deal. The numbers I’ve gotten so far are:

$559,900 Recent Appraisal
399,900 Purchase Price
75,000 EGI
7,500 Vacancy/Credit
30,000 Expenses
37,500 NOI
25,541 Debt Service 80% financing
11,959 Cash flow before taxes
1.468 DSCR

My problem is how do I get this financed. I don’t have a lot of money and my credit is not good. I may have a credit partner, if needed, but I don’t know how to come up with the down payment. Please help me with ideas.

Re: New Deal, HELP!!! - Posted by Ed Garcia

Posted by Ed Garcia on August 01, 2008 at 10:01:18:


Iâ??ve been trying to lie low lately and give others an opportunity to answer questions only giving input in the event no one answered a question or the question was answered with an answer that is not satisfactory. As you can tell the answer to your question was as intelligent as the person who gave it.

When looking at a deal regardless if itâ??s commercial or residential, deal structuring is paramount. If you ever go back into the Archives youâ??ll find that Iâ??ve said this over and over again and demonstrated it when implementing structuring on different deals as Iâ??m about to do now in your case.

Ray Alcorn has often said that â??Opportunity, without capacity, is nothing more then an illusion.â??

Capacity usually means money or the ability to financially put the deal together with a combination of money and financing. Capacity can also mean knowledge or as I said previously, deal structuring. So without me being judgmental of your deal which is also important, Iâ??m going to go over the options you have available in dealing with this Opportunity not necessarily in order.

  1. FLIP THE DEAL. Investors do flip all of the time when it comes to SFRâ??s (Single Family Residence) and trust me you can flip a commercial deal as well.
  2. PARTNERSHIP. This is more then likely the best shot for you since your desire is to hold the deal. Remember a half deal is better then no deal.
  3. SELLER CARRY-BACK. Because of your credit issue as well as your lack of funds, I strongly suggest that you look for motivated sellers and negotiate a seller carry-back in every deal your working. If the seller is not motivated youâ??re going to have trouble in delivering the deal any way.
  4. LEASE/OPTION. A lease/option gives you control of the property allowing you to repair the property or in your case fill the vacancy to increase the value of the subject property. It would buy you time to repair your credit and put you into a position to treat the subject property as a refi requiring no down payment which would be extremely helpful in your situation.
  5. HARD MONEY. Because of predatory lending, hard money lenders are looking towards commercial properties such as the one that your discussing or none owner occupied houses where they are not restricted to loan fees. If you donâ??t have or canâ??t find a hard money lender you can run an ad for an investor creating your own hard money lender.
  6. A COMBINATION OF ANY OF THE ABOVE. More then likely as you do deals youâ??ll start to recognize how to modify the various methods Iâ??ve discussed that allow the deal to work. Example, you might get a seller carry-back with hard money. A seller carry-back with a partner and then go to the bank etc.

Letisha, These are just a few options that I feel are available for you with your circumstances and I hope this has given you some food for thought.

Ed Garcia