I'm tired of the little deals

6 Replies

I want to purchase a building anywhere as long as it's not in a D class neighborhood, or some place expensive like NYC or California. I'm tired of fighting with these investors with these crazy bidding wars in my area. I hear of people doing owner financing on buildings with only 10% down, that's a dream deal to me. I'd like to get in bigger deals like that I'm willing to go 10% on a 1.5 million dollar deal. Where can I shop around for multi-unit buildings, with owners who are willing to act as the bank, or I'll just have to shop around and bring the idea of owner financing to the owner's attention? 

Shop around and/or ask the seller.  Loopnet is a great resource, and you can also search for terms in the public remarks of a listing like owner financing or owner may carry.  Even though some owner financing is available it will generally be more expensive and shorter term than a bank would offer.

Originally posted by @Aaron K. :

Shop around and/or ask the seller.  Loopnet is a great resource, and you can also search for terms in the public remarks of a listing like owner financing or owner may carry.  Even though some owner financing is available it will generally be more expensive and shorter term than a bank would offer.

 Why would owner financing be more expensive than getting finance from banks?

@Jonathan Polanski In most cases, owner financing should be more expensive than a bank. This is because unlike conventional financing, you can't shop for owner financing on the same property. 

Nonetheless, it all depends on seller motivation. If you can structure the conversation and deal in a way that accomplishes the needs of the seller, you might get seller financing at better terms. 

Most commercial lenders require 15-20% down payments. If you're tired of chasing smaller deals you can either (A) partner, (B) invest through a syndication, (C) invest in public REITs and (D) raise capital to go into bigger deals. 

I wouldn't just rely on Loop Net and/or other public resources. Remember, if it's public then everyone can see it i.e. you have no edge. To get an edge you will need to develop relationships with brokers and lenders to ensure that you are first on their mind when they come across a deal that fits your criteria. 

Originally posted by @Omar Khan :

@Jonathan Polanski In most cases, owner financing should be more expensive than a bank. This is because unlike conventional financing, you can't shop for owner financing on the same property. 

Nonetheless, it all depends on seller motivation. If you can structure the conversation and deal in a way that accomplishes the needs of the seller, you might get seller financing at better terms. 

Most commercial lenders require 15-20% down payments. If you're tired of chasing smaller deals you can either (A) partner, (B) invest through a syndication, (C) invest in public REITs and (D) raise capital to go into bigger deals. 

I wouldn't just rely on Loop Net and/or other public resources. Remember, if it's public then everyone can see it i.e. you have no edge. To get an edge you will need to develop relationships with brokers and lenders to ensure that you are first on their mind when they come across a deal that fits your criteria. 

So owners aren't typically open to financing deals at the same rates banks are loaning at? I heard of a guy putting down 12% on a 1.45 million dollar deal @ 4.5% owner financing. Or is there more to owner financing than just that? because banks have a ton of fees and you're typically spending 5-9% on closing costs depending on where you live.

Originally posted by @Jonathan Polanski :
Originally posted by @Omar Khan:

@Jonathan Polanski In most cases, owner financing should be more expensive than a bank. This is because unlike conventional financing, you can't shop for owner financing on the same property. 

Nonetheless, it all depends on seller motivation. If you can structure the conversation and deal in a way that accomplishes the needs of the seller, you might get seller financing at better terms. 

Most commercial lenders require 15-20% down payments. If you're tired of chasing smaller deals you can either (A) partner, (B) invest through a syndication, (C) invest in public REITs and (D) raise capital to go into bigger deals. 

I wouldn't just rely on Loop Net and/or other public resources. Remember, if it's public then everyone can see it i.e. you have no edge. To get an edge you will need to develop relationships with brokers and lenders to ensure that you are first on their mind when they come across a deal that fits your criteria. 

So owners aren't typically open to financing deals at the same rates banks are loaning at? I heard of a guy putting down 12% on a 1.45 million dollar deal @ 4.5% owner financing. Or is there more to owner financing than just that? because banks have a ton of fees and you're typically spending 5-9% on closing costs depending on where you live.

There is no magic formula. Anything is possible if you have a motivated enough seller. Example: You'll get a better terms (relative to a bank), if a seller has to free-up equity to pay a tax bill or pay the medical expenses. You won't get better terms if the seller has a sizable portfolio, doesn't need the money and/or is not in any hurry. 

Contrary to what you hear on these forums, banks do not have as high fees as everyone imagines. They are in the business of making money by scaling up their lending practice. In more cases, they will have better risk management processes than Joe-blow seller who's owner financing. Hence, you, the buyer, can end up paying significantly less fees and on better terms. 

Nonetheless, there are investors who have made seller financing into an art form. In this heated market, you might not have motivated sellers i.e. low chance of getting better seller-finance terms. 

P.S. I've heard of guys putting 0% down on $20M deals and getting 4-5% financing. That is an aberration and not something that happens regularly.  

@Jonathan Polanski owners don't have terms as good as banks most of the time because imagine if you were a seller retiring from the business why would you want to sell your property with a 30 year owner financing deal if you're 80 it doesn't make much sense for them.  Also most of the time people seeking owner financing would not qualify for the best rates from a bank if at all due to high debt or other factors, thus the owner would not and should not treat that person the same as someone with great income, no debt, and stellar credit.  The example you cited is likely to be very rare, I do not know the circumstances surrounding it but my guess would be that that deal was financed for 5 years, maybe 10 or whoever got it was extremely fortunate.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here