Posted by Matt on December 30, 2007 at 18:39:50:
Chambers - this looks like the type of deals I am looking for in my market (Boise area). Did you ever get a response? In order to make my deals work I’d need to work in seller financing in some way to cover the down payment. Any info I can glean is useful, so I hope to see an answer on this one.
-Matt
Structure Deal with 75% seller Financing - Posted by Chambers
Posted by Chambers on October 07, 2007 at 05:11:04:
Hello
I am interested in purchasing a multi unit(89 units) for 5.6M (in NY)for which the seller is willing to finance 75% (yes there is existing debt which includes prepayment penalty before 30 months) of the asking price , of course I have to come up with 25% (1.4M). I have some thought but not sure the best route to make it enticing for the seller to move towards maybe a 100% financing??..(I know I just bottom lined this scenario for you)
1.) create a 2nd and do a wrap
2.) create second sell note before closing
3.) create land contract on second refi later???
4.) Look for partner/s for downpay (where do I look)
5.) Lease purchase???
6.) Should I get an acquisition loan, bank loan for the …25%???
I know alot has changed in ref to lending, but I also know that new creative ideas have immured as well…looking for thoughts,suggestions, applications etc.
Thank you for allowing me to share my thoughts…this site is awesome.
Re: Structure Deal with 75% seller Financing - Posted by Ed Garcia
Posted by Ed Garcia on October 07, 2007 at 08:54:27:
Chambers,
First of all we donâ??t even know if this is a deal.
We donâ??t know the price verses market?
We donâ??t know the cash-flow, Gross Rents, NOI estimated Cap Rate etc.?
We donâ??t know the area, what part of NY?
We donâ??t know if there is up-side in the deal that will allow us to get out of the deal?
The only reason the seller is willing to carry or wrap the deal is because of the prepay.
Just having the seller carry-back a first of 75% is of no significance because you can easily find a lender to lend at 75%. If the seller carried 100% for 30 months and the price isnâ??t right , you may not have enough up-side to refinance the subject property to pay off the seller and the underlying loan.
Need more information.
Chambers, here are 18 basic fundamental questions I ask in order to get enough information to formulate how to approach or analyze a deal.
We need more information before we can go any further with your deal.
(1) Describe The Units and the surrounding area?
(2) How old are the units?
(3) What’s the unit mix ( how many 1 br. 2 br etc)
(4) What’s the vacancy factor in the area?
(5) What is the gross income of the units?
(6) What is the vacancy of the units?
(7) What is the NOI?
(8) What are market rents in the area?
(9) Are there any other Units in the area for sale?
(10) If so at what Price?
(11) What are the going Cap rates in the area on multiple units?
(12) Have any other Units in the area recently sold?
(13) If so at what price?
(14) How much does the seller owe on the units?
(15) If there is a loan, is it assumable?
(16) Will the seller carry a second?
(17) Is there any differed maintenance?
(18) If so, estimated cost of maintenance?
(19) How’s your credit?
If you answer these questions, then I can answer yours, with a meaningful answer.
Otherwise, it’s just, What ifs? or hypothetical.
Ed Garcia
Re: Structure Deal with 75% seller Financing - Posted by Chambers
Posted by Chambers on October 07, 2007 at 19:10:31:
I apologize for the vague details on the first go around…Thanks for your correction Ed. Here are answers to some of your questions:
(1) Describe The Units and the surrounding area?..13 two story buildings in Rochester NY on 6+ acres
(2) How old are the units? =>â?¦… Built in 1970 renovated in 1999
(3) What’s the unit mix ( how many 1 br. 2 br etc) =>â?¦. 44 1bd/ba 88 2bd/1ba
(4) What’s the vacancy factor in the area?=>â?¦. 5% is used but occupancy is 98% market area is 97%
(5) What is the gross income of the units? =>â?¦ $970,140
(6) What is the vacancy of the units? =>â?¦2%
(7) What is the NOI? =>â?¦$ 494,750
(8) What are market rents in the area? =>â?¦(1BD = 610 â?? 710)…(2BD = 695 - 740)
(9) Are there any other Units in the area for sale? YES
(10) If so at what Price? 135 units 7.1M
(11) What are the going Cap rates in the area on multiple units? =>â?¦ 7.5
(12) Have any other Units in the area recently sold? =>â?¦N/A
(13) If so at what price?
(14) How much does the seller owe on the units?..$3.2 M
(15) If there is a loan, is it assumable? =>â?¦ 1% Loan assumption fee ( bal has a prepayment penalty )
(16) Will the seller carry a second? =>â?¦.Will carry 75% Ltv of purchase price
(17) Is there any differed maintenance?=>N/A…there is a tax exempt status in effect for 8 remaining years
(18) If so, estimated cost of maintenance? =>â?¦.
(19) How’s your credit? B credit (have not pulled recently)
This property is being sold via the acquisition of 100% of the existing LLC…Hope I have given enough information for evaluation.
Thanks again for response