I have found two lots for sale, the owner is open to an offer for seller finance. Im not sure how to structure this offer, ideally i will be building a multi family (duplex) built from shipping containers. The lot is already zoned appropriately, and i am waiting on final designs for the project before i shop for the money for construction costs. There will be no return on this property until post construction, at which point I can refnance out the cash or sale the units. Any advice would be welcomed and much appreciated!
1. How long will it take to build the duplex? Interest only term with a balloon payment?
2. Do you have a lender in place who will refinance a MF dwelling made of shipping containers? Do you have a buyer in place who will purchase the duplex after it is built & leased?
3. In reference to #2, Having a well thought out exit strategy will help inform your initial offer.
@Cody Malone sounds like a neat project. A friend of mine has had success seller financing small trailer parks where the seller owns the units, then he comes in and puts "tiny homes" on, rents them out then sells to another investor. He structures the deals roughly as follows:
- Puts 20% down on the value of the property, in your case, the two lots.
- Pays 8% interest for year one and 9% of interest in year two if it takes that long. I believe he makes quarterly interest only payments. The principal then balloons on an agreed upon date. (Give yourself enough time for the sell out of the units, or refi). Just be careful to factor in enough time for the balloon if its a refi and the lender requires it to cashflow for a certain period of time.
Maybe something like that would work for you?
Hello @ryancox, thanks for the response.
1.Construction time frame: I am estimating at 1 year, which was doubled from my initial estimate in order to account for the learning curve. I initially offered interest only w/balloon on super short terms (2 years). The owner is wanting 10% down on a 15 year amortized.
2. Currently the main issue i am having is the way the units will be secured. Without pouring a traditional slab, lien holders are considering it similar to a mobile home, this can be resolved by adding a traditional slab under the area, which still fits in the business plan.
3. Exit strategies are as follows:
1. Refinance for a buy and hold model using current lien holders
2. Sale to investment groups, Lubbock is a college town, and the vacant lots are in the heart of college duplex rentals that perform consistently
3. Due to the marketing plan and uniqueness of the structure, finding a cash buyer would be the last option for exit
Sorry for the long reply, hope this answers your questions
@max taylor Thanks for the advice, sounds like your associate has a pretty good thing going! That was what i originally approached the owner with, but she is wanting something more traditional, with 10% on a long term contract, i am okay with the cash down, i was thinking the short term with balloon was more appropriate for the purpose of construction, what are your thoughts?
@ryan cox, hey ryan, i didnt include a space, so im not sure if it notified you of the response, sorry! Just learning lol
@Cody Malone, We looked into putting a shipping container on one of our properties in the city of Lubbock and found out they are illegal inside city limits. Not that everyone follows that, but if your plan hinges on using shipping containers, be sure it would be approved by zoning!
As someone who's built a few houses, I never understood the shipping container appeal. You get the shell of the building, but shells aren't that big of a part of building expense. And you have to accept so many constraints to get that shell. It's a cool modern look, but that can be achieved in other ways.