BiggerPockets

Seller pays agent if seller had the property listed, so you won't have that concern directly. But it has happened where the seller's agent accepted a note for the commission; Rich Weese documents some transactions like this in his book as I recall.

Sometimes a master lease option can work in this type of situation. Or try to get seller to accept part of the money as a balloon payment in some small number of years in the future; that way they don't have to wait forever to get their money, and you buy some time for a refi.

Dee,

How many HML's did you go to?...first off I'm not sure I like the numbers on this one, but without knowing more about the property if I were to be into a 4 unit for $460k I'd want to be taking in at least $6k per month...unless all 4 units are 3 bedroom units I doubt you'll be taking in $6k per month...the income/cash flow is only 1 factor the HML's will be looking closely at...it is very hard to find good multi family deals in the greater Boston area, they are out there just very hard to find especially in the Walthams, Watertowns, Arlingtons, Somervilles type cities...you need large down payments in order to cash flow in those cities close to Boston...

Also say if you were to get a HML on this property what is your exit strategy out of the hi interest loan?

The monthly rent is about $4300. My exit strategy will refi. The most i can come up with is 45k.

I agree the numbers look risky but here is one route...have the seller carry owner financing on the property short term 1 year...put a sizeable down payment and before closing show good faith by purchasing materials for the property improvements...that way the seller knows worst case scenario if the deal goes bad they will get the property back in better condition then when it was sold...Then assuming all goes well with rehab you should have enough equity that you could attract a good HML...make sure to let the seller know what changes will be made to the property and be sure they are authorized in the terms of the owner finance transaction. The best way to make a seller finance deal fly is to make default a winfall for the seller...

My suggestion is not to buy this property. It will bleed cash. Its a bad deal. Find a better deal.

Paying $460K for $4300 in monthly rent is WAY too much to pay to generate any cash flow.

Paying 96% of market value is WAY too much to pay. You're almost in the hole with just purchase closing costs and certainly in the hole with sales closing costs if you have to sell.

This place costs $460K and you are qualified for $200K in financing and appear not to have the additional $260K on hand to close the deal.

You appear to be wanting to buy for one price using the bank loan and then have the seller carry a second without the bank's knowledge. That loan fraud. The only way you could use a seller second is if its fully disclosed to the lender and they approve it. Since they will include that debt in your DTI and qualification calculations, and they've already said you can only have $200K it seems unlikely they will approve a seller second for another $200 or whatever. Perhaps I misunderstand the situation.

Find a rental property that you can actually afford. One that's within the $200K loan amount plus whatever amount you have to put down.

Find one that actually cash flows. Use whatever terms the bank is offering (rate and term), calculate the P&I payment assuming 100% financed. Double it. That's the minimum rent you need to be break even. Better to do this in reverse, since rents are controlled by the market (that is, they're out of your control.) Take the market rent. Cut it in half. Use that as the payment, use the bank's rate and term, and calculate the present value. That's the most you can pay.

Find a property you can acquire at a significant discount to its market value. You lose 2-3% when you buy and another 8-11% when you sell. So you need at least a 10-14% discount off the market value just to be break even. Prices may continue to fall. You want some margin to handle any additional downward price changes.

If you can't do this stuff, don't buy rental properties! The goal here is to make money, not to own real estate. If you can't make money, don't buy it.

I am with Jon. Walk away and hope you get your EM back.