Investor · Cocoa Beach, FL · Member since 2015 · 132 posts · 59 votes
Help please! Any ideas are appreciated.
I'm trying to bring together a purchase of a package of SFR in a commercial blanket loan. The problem lies in my not having enough cash for the full 25% down payment required. Simply getting the seller to hold a second also doesn't work because it puts me at over 75% LTC and just under DSCR thresholds.
I'm hesitant to start shopping for equity partners, 1) because I don't know many, and 2) partnerships always tend to have an issue arise and not sure I want to deal with issues with minority partners, especially if their goal is distributions of capital too early in the deal...
Is there a creative way to keep the seller in the deal that doesn't lower debt coverage ratios or maybe puts a future buyout option into equity? Is there a way to pull about 5-7% more cash into the deal to get it done? I'm close to being able to make it work and not ready to walk away, but the price is not going lower, but the seller is willing to consider something flexible...
Yep Steve, kickbacks undisclosed to a lender is mortgage fraud and tax issues as well you can get into lending matters that are not properly disclosed with the seller lending money. A title plant or an insured closing agent isn't the best place for financial advice, they will send money anywhere they are instructed, they aren't on the hook for what goes on outside of closing.......except during a routine examination some examiner may see it. Not saying a seller can't loan or give you money, but it better be fully disclosed to all the powers that be.
As to this deal, drop one of the properties out of the deal. Instead of searching for more income, reduce the debt load.
After the deal is done, then go do the other property, he may seller finance it and you'll be in a refi instead of a purchase arrangement.
There are many ways to take the last property or even several down with a conventional deal up front, but usually, in the end, the other properties will need to meet conventional thinking, that's the goal to work toward.
And, yes, you might use a TIC and partner with the seller, buy his interests over time through the TIC Agreement instead of a financing agreement with a secured interest in the title that is sold. Eat the elephant one bite at a time. Good luck :)
I once knew of a guy that raised the PP about $25k for his seller in exchange for the seller signing instructions to the title co of a $25k distribution of his sale proceeds be directed to xxxxx.
$25k may have been held from said xxxx in an account on behalf of buyer for the purchase of the property. So I heard...:)
@Steve Vaughan Interesting story you heard. I wonder how the seller felt about paying taxes on the $25k, unless somehow he wrote it off as a 1099... Did you ever hear about that detail?? ;)
Good point @Luke Grogan. There will also be a little higher title ins cost as well as transfer/stamp tax as well.
As a long-term cap gain, my example should be a $2500-ish issue. Maybe offer $27.5k more with instructions to distribute $25k. When we whittle down the details of problems for what they are, we can usually work them out and find a solution.
You probably figured out the guy 'I knew' is me. I don't want to condone mortgage fraud or anything is why I wrote it as a wink-wink. Just be careful with your lender and be honest with your seller. Sounds like they want to make this a win-win as well so I brought the idea up :)
Understood Steve Vaughan We are definitely working it, but the numbers are a little far off to do the cash back at closing, but good idea.
I'm leaning towards asking them to hold equity with a buyout offer later. I've been upfront with the lender and they like that thought... BUT, that also creates a taxation issue and there is some sensitivity there.
Yep Steve, kickbacks undisclosed to a lender is mortgage fraud and tax issues as well you can get into lending matters that are not properly disclosed with the seller lending money. A title plant or an insured closing agent isn't the best place for financial advice, they will send money anywhere they are instructed, they aren't on the hook for what goes on outside of closing.......except during a routine examination some examiner may see it. Not saying a seller can't loan or give you money, but it better be fully disclosed to all the powers that be.
As to this deal, drop one of the properties out of the deal. Instead of searching for more income, reduce the debt load.
After the deal is done, then go do the other property, he may seller finance it and you'll be in a refi instead of a purchase arrangement.
There are many ways to take the last property or even several down with a conventional deal up front, but usually, in the end, the other properties will need to meet conventional thinking, that's the goal to work toward.
And, yes, you might use a TIC and partner with the seller, buy his interests over time through the TIC Agreement instead of a financing agreement with a secured interest in the title that is sold. Eat the elephant one bite at a time. Good luck :)