Christen:
Are they Quadplexes (4 units) or more than 4 units? If you are selling the properties to (1) one investor and the aggregate total of units which will serve as collateral for your seller financed Note is greater than > 4 total units then it would be consider COMMERICAL income property.
Now if you sell a Four-Plex here to (1) one investor and then another Four-Plex over there to a different (1) one investor, etc. - then under these circumstances they could be considered residential units (1-4).
Regardless the focus on newly created seller carried back paper - especially on deals being sold to NON OWNER OCCUPANT payors (investors) is heavily focused on EQUITY (the equity they establish from the get go) and their CREDIT (need strong credit profiles and scores.
Remember in the traditional loan marketplace right now for the most part there is no such thing as a NO DOC - Stated income loan any longer.
If you choose to sell with the light down payments as aforementioned, by prepared to HOLD your seller financed “paper” for quite some time.
Continued best to your success;
Michael Morrongiello
Paper Practioner www.sunvestinc.com
Author of the following home study courses;
Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
&
The Unity of Real Estate & “Paper” - Advanced techniques for both the acquisition and disposition of properties using Real Estate “paper”
Posted by Christen on September 18, 2009 at 10:18:45:
I am having a tough time getting people to come out with the 20% down cash. I have multi-families investors are buying. So they are non-owner occupied, the value and cash flow is there. My question is how badly of a hit am I going to take if I sell them 5-10% down and I hold back 10-15% in a second note. Will the first even be worth anything if the buyer only has 5% to 10% in the deal. Or will the first position mortgage of 80% still be worth something. I know with 20% down and great credit 680+ I am looking at 80 cents on the dollar plus or minus, but with say a second note of 10%, a buyers cash down of 10% and a first mortgage of 80% is it still going to be in that 80 cents range?
Christen:
Your dealing with Commercial income producing properties (anything over 4 units). The typical down payment that most lenders, note investors, etc. wish to see is as you pointed out 20% OR MORE.
With a light down paynent of 5% -10% and your holding back a 2nd lien, assuming personal liability, strong credit, good financials, rent rolls, etc. your 1st lien will be still be saleable. However it will have to be seasoned longer.
A BETTER structured would be for you to carry back a 70% LTV 1st lien and then if getting 10% cash down, a 20% seller held and retained 2nd lien.