The art of the deal - How do I get this one done?

[Luke Grogan]

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...

[Bill Gulley]

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 :)